A South Dakota case before the Supreme Court of the United States could have implications for national and Wilton Manors tax preparation.
The high court heard arguments last month in a suit that could determine whether e-commerce companies will have to pay sales taxes in states where their goods are purchased, even if they lack a physical presence in those states. South Dakota is suing to collect taxes from e-commerce company Wayfair.
At issue is the state’s argument in favor of a concept called economic nexus. Under that concept, companies that sell $100,000 worth of goods in South Dakota would be subject to state sales taxes. Aside from giving a boost to state coffers, such a change would even the playing field for mom & pop retailers with brick-and-mortar stores. But it would be cause difficulty for e-commerce players. For a company near Wilton Manors, tax preparation would become more complex.
Still, there’s no question the landscape of commerce has changed since the 1992 precedent was set. In the 1990s, business tended to get done face-to-face. Now, billions of dollars in commerce gets done over the Internet.
Stephanie Martz, a lawyer representing the National Retail Federation, which supports South Dakota, told Reuters, “Things have changed a lot since 1992. The entire nature of interstate commerce has changed.”
States have periodically argued that the new paradigm means they lose out on sales tax revenue. Some have responded by creating laws to recapture that revenue, leading to uncertainty.
A Supreme Court ruling favoring South Dakota would almost certainly set a precedent that other states would follow with their own laws to capture sales tax from online transactions. Like Florida, South Dakota does not have a personal income tax, which leads it to rely more than many other states on sales tax. But even states that have personal income taxes are likely to follow South Dakota’s lead if it prevails.