Collecting sales tax is common for any business owner with at least one physical location. If a good or service is sold, state and local laws dictate that a sales tax should be applied. But is sales tax still a requirement if you sell online? And does it matter if the buyer is in a different state? Read on to learn the latest on how sales tax work on the web.
Clearing the confusion
In 1992, the U.S. Supreme Court established a precedent that unless a business had a substantial connection to a state, the state could not collect sales tax from the business. This was great news for online retailers and online sales boomed as a result. But as online shopping grew over the years, states were missing out on billions of dollars of annual tax revenue.
States began to clash with online retailers until June 2018, when the Supreme Court case, South Dakota v. Wayfair Inc., put the issue to rest. The court ruled that online retailers can be required to collect sales taxes for the state the buyer is in, even in states where the retailer has no physical presence such as a storefront, office or warehouse.
What the decision means for your business
In this current sales tax environment, there are key points to know and remember if your business sells online:
The seller’s landscape is changing
The Supreme Court’s 1992 sales tax ruling had given online sellers a selling advantage over businesses physically residing in a state. It was a great way to get the online marketplace off the ground but this latest decision shifted the landscape and leveled the playing field. Know the laws, stay abreast of changes and craft a plan to keep your customers buying and your business thriving.
If you want some additional guidance to navigate these and other recent developments for your business, the knowledgeable bankers at California Bank & Trust can help. Contact us at (800) 355-0507 or visit a branch near you. [cite::171::cite] [cite::172::cite]