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In the landmark case of South Dakota v. Wayfair, the US Supreme Court overturned the Quill physical presence standard, finding it “unsound and incorrect.” The Court noted that South Dakota law includes several features intended to prevent undue burdens on interstate commerce, which include no obligation to retroactively remit the sales tax. Since the June 2018 decision, all states that impose a statewide sales tax have adopted economic nexus standards as well as collection responsibilities for marketplace facilitators. (In 2021, Florida and Kansas adopted legislation, and Missouri’s legislation is pending with the Governor.)
Almost all states have expanded their nexus standards in the wake of the decision to require sales and use tax compliance for companies based on their in-state receipts or transactions. Remote sellers and marketplace facilitators must monitor these changes, their effective dates, and impact on their compliance obligations.
Companies must determine what goods and services are taxable in the new filing jurisdictions and implement appropriate procedures to manage the increased number of filings.
Companies will not only have to consider where they have additional filings and the potential ASC 450 impacts, but they will also need to consider updating their systems and infrastructure with tax software, analytics, RPA/BOTs to address the impact of economic nexus and marketplace facilitator requirements on a go-forward basis.
The Wayfair decision and continuing state legislative enactments and rule changes may also impact companies involved in M&A transactions with prior sales tax exposures and/or escrow accounts.
Retail and consumer markets
Manufacturers/wholesalers
Technology: e-commerce retailers, digital service providers, software sellers, online gaming or similar sellers of electronic products
Companies with merger and acquisition activity
Inbound retailers and private companies
“Small business”
Private equity or portfolio companies