E-Commerce Sales Tax – An Update

On June 21, 2018 the e-commerce world changed forever.  Many consumers and small businesses are still not aware of how ordering on-line changed that day.

The Supreme Court ruled 5 – 4 in the case SOUTH DAKOTA vs. WAYFAIR,  that states can mandate that small businesses without a “physical presence” should collect sales tax in that state.  A majority of states settled on the requirement of 200 transactions or $100,000 of sales in that state.  Meeting either amount alone could trigger the requirement.  It also does not matter how small the individual transaction is ($10 for example).  If there were 200 sales transactions in that state, it would trigger a tax obligation for the business.

So, it became incumbent on all small businesses selling via the internet to track the number of e-commerce sales in each state and the revenue received from each state.  For example, the state of Kansas did not previously have a requirement, however in 2021 that changed.  It is now one transaction or one dollar in sales.  It is also the responsibility of each business to track any changes in the requirements for each state to be sure they remain compliant.  Ignorance of the tax law is not an excuse.

Sitting in these e-commerce shoes, we learned that at the end of 2020, we triggered two states and are now required to collect sales tax in Kansas and Kentucky going forward. With a physical presence in Ohio, we have always had to collect and remit taxes in Ohio and that does not change.  Lastly, since we have sales in all 50 states, we must continue to monitor all states in 2021.

We are working with the professional firm AVALARA to stay abreast of tax changes, filing and payments.  We chose to share this information to keep you informed, so if sales tax appears on your invoice, you are not unduly surprised. We know seeing sales tax on your purchase is disappointing.  This was neither our desire nor decision.  If you have any questions, as always, please don’t hesitate to let us know!

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