The US Supreme Court ruling in the South Dakota versus Wayfair case might have opened a Pandora's Box of tax compliance problems internationally as states look to collect taxes they believe are owed to them. Californian CPA Daryl R. Petrick, Partner at Bowman & Company, LLP, explains the decision and the possible implications for retailers all over the globe.
South Dakota (a sparsely populated US state) sought to force the online retailer Wayfair to collect its 4.5% sales taxes on behalf of the state. Traditional, bricks-and-mortar retailers have been complaining for a long time about customers being able to effectively obtain a discount by doing their shopping over the internet from companies that do not have a physical presence in South Dakota as bricks-and-mortar stores are obligated to collect sales taxes from customers buying in-store, while internet retailers are not.
In the Wayfair case, the Supreme Court ruled in favor of South Dakota. This means that Wayfair (and others similarly situated) now have the obligation to collect and remit South Dakota taxes, irrespective of whether their location is in the US or overseas.
Daryl R. Petrick comments: "This ruling thus gives a boost to states that view sales tax underreporting as a major issue and provides a quick source of revenue. My state of California has indicated that they plan to copy South Dakota's law almost immediately."
For more analysis of the Wayfair case and the possible tax compliance implications for foreign and domestic retailers, click here to read the full article: https://www.alliottgroup.net/practice-management-resources-for-owner-managed-firms/wayfair-online-sales-income-tax/
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