A recent U.S. Supreme Court decision overturned a rule that a taxpayer must have a physical presence in a state to owe sales and use taxes there. The court action is South Dakota v. Wayfair, Inc. Like South Dakota, many states have passed laws that base the tax-paying status of out-of-state businesses on number of transactions or gross revenue rather than physical presence.
The South Dakota law, which the Supreme Court upheld, applies to out-of-state sellers with more than $100,000 in sales or 200 transactions a year delivered into the state. States that do not have such laws are expected to address the issue in upcoming legislative sessions.
The Supreme Court decisions means that dealers should carefully monitor their sales activity in case they need to pay taxes in another state. Some dealers could decide to register in additional states where they sell new vehicles or send parts for sale. Sometimes a single transaction, or a few transactions, could be enough to trigger the tax filing requirement.
Thanks to Crowe, LLP for providing this information. This article is for information only and is not intended as tax advice. Dealers are encouraged to consult their accountant for advice about their particular situation.Download Bulletin PDF