It’s been a year of changing dynamics for Canada-US trade. NAFTA renegotiations have dominated headlines in recent months, and now that the new USMCA agreement has been signed, it’s time to revisit a lesser-reported piece of legislation that has pressing implications for Canadian tech companies.
You’ve probably heard by now that on June 21, 2018, the United States Supreme Court delivered the South Dakota v. Wayfair decision—one that could significantly change the way Canadian companies do business with US customers. In short, US states can now obligate companies to collect sales tax when selling goods or providing certain services to US customers while operating out of state, even if they have no in-state physical presence. The decision comes after mounting resistance in recent years against the Quill Corp. v. North Dakota decision, which made physical presence a requirement for states to collect sales tax from out of state vendors. Not every state has passed laws similar to South Dakota yet— but it is just a matter of time for the floodgates to open for further changes.
The immediate consequence of this ruling is obvious; Canadian technology companies may no longer enjoy any price advantages from not having to charge US sales tax compared to brick-and-mortar outlets, which has been a point of contention over the years. Companies far and wide could find themselves newly accountable for state sales taxes, and must prepare accordingly to keep doing business as smoothly as possible.