After receiving complaints from small business owners, the Senate Finance Committee held a hearing on June 14th to review the effect of the2018 Supreme Court decision in South Dakota v. Wayfairon small businesses and remote sellers.
In 2018, the Supreme Court reviewed and upheld the lower court’s decision in South Dakota v. Wayfair eliminating the physical presence requirement for a state to impose a sales tax on sales of goods or services in that state. An “economic nexus” standard replaced the physical presence requirement, which meant that a state could impose a sales tax on goods and services sold into a state even if the seller has no physical presence.
Out-of-state sellers, also called remote sellers, must collect and remit sales tax on goods and services sold in all states, even if they do not have a physical presence. To complicate matters, all states that impose a sales tax, except Missouri, which will be in effect in 2023, enacted an economic nexus standard of its own. In addition, many municipalities and localities impose their own sales tax on top of the state sales tax rate.
As a result, small businesses argue that this has created significant confusion and an expensive compliance burden. To respond to small businesses, Senate Finance Chairman Ron Wyden (D-Ore.) stated in a hearing held on June 14th that there are many outstanding issues with respect to the Marketplace Fairness Act negatively impacting small businesses and remote sellers. For this reason, Wyden is drafting legislation to assist in simplifying the rules for small businesses and remote sellers. Wyden intends to alleviate the toll on small businesses by implementing more straightforward rules and guidance. Even if Wyden proposes legislation this year, it is unlikely that any action taken will occur this year. The Administration and Congress have other priorities before the mid-term elections. Therefore, small businesses and remote sellers must continue to comply with the current sales tax rules and compliance obligations.
Author: Bonnie Susmano, JD, MBA | [email protected]
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If you would like to discuss how the 2018 Supreme Court decision in South Dakota v. Wayfair may impact your business, please contact Withum’s State and Local Tax Group for a deeper discussion.
