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Wayfair triggers state tax consequences for inbound companies

August 2018


Following the US Supreme Court’s historic South Dakota v. Wayfair decision, states no longer are restricted from imposing sales tax collection responsibility only on entities with an in-state physical presence. The decision could have a significant impact on entities making sales into US states, and potentially imposes unique burdens and considerations for US inbound companies regarding both sales and income taxes imposed by US states.

The takeaway

Non-US companies previously relying on absence of a US physical presence to justify protection from state income and sales taxes should reexamine their level of sales to states and their ‘virtual’ contacts with states to determine whether they have a state tax filing obligation.

Certain non-US companies without a US permanent establishment or a US trade or business may not have a federal income tax liability and possibly not a federal income tax filing obligation. Despite the lack of a federal liability, or reporting requirement, such companies still may be subject to a state income tax and/or sales tax.

Non-US companies with a limited footprint now may need to determine if they have the capability with their systems to collect/remit sales taxes, or if additional investments are needed.

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Peter Michalowski

Peter Michalowski

Partner, State and Local Tax Consulting Leader, PwC US

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