South Dakota v. Wayfair: Preparing for the Overruling of Quill
On April 17, South Dakota v. Wayfair Inc.was argued before the Supreme Court. The court has been asked to consider whether to overrule Quill, the 1992 decision that “The Constitution’s commerce clause prohibits the states from requiring out-of-state retailers that do not have a physical presence in the state to collect tax on sales to state residents.*”
South Dakota’s argument, simply put, is that the states are losing out on sales tax revenues that can be invested in infrastructure, education and healthcare; and that Quill creates a “price advantage” for remote out-of-state sellers, while harming local small businesses. Wayfair, on the other hand, has argued that they should not have to charge tax where they are not physically located.
Preparing for the Potential Demise of Quill
While the case has yet to be decided, many experts continue to believe that SCOTUS will overrule Quill, thereby empowering states to require that remote sellers collect and remit sales tax. Those sellers who have not been collecting and remitting sales tax stand to be hit rather hard – faced with new compliance obligations and therefore the loss of their competitive price advantage. On the other hand, many of the larger online retailers, such as Amazon, already collect sales tax in spite of their physical location, so such a decision by the Court will not be disruptive.
“Those sellers who have not been collecting and remitting sales tax stand to be hit rather hard – faced with new compliance obligations and therefore the loss of their competitive price advantage.”
Are You Ready?
Now is the time that companies should be considering how best to prepare their financial systems to react quickly to the ever-evolving e-commerce landscape. Consider now whether your processes for vendor or customer invoices accurately bill the correct tax, and/or verify accurate payment of tax. Can you affirmatively answer these questions?
- Identify: I understand the state-by-state taxability of items we buy or sell.
- Collect: We can accurately calculate and collect sales tax per state.
- Remit: We can efficiently report and pay the sales tax that we have collected.
Know your risk. Prepare for the future.
At GAGNONtax, we will continue to closely follow the South Dakota v. Wayfair case, and will offer additional commentary and recommendations following the decision. In the meantime, we welcome the chance to speak with you.
If you are not confident in your current systems and processes to support industry’s ever-changing requirements, I would be happy to assess your approach and recommend enhanced, automated solutions to ensure you can meet current and future best practices. GAGNONtax works closely with professionals nationwide to solve their tax challenges, using creative strategies and expertly-crafted technology. We have the expertise and experience of the Big Four, but not the layers of people and processes. Whether it’s through our tax consulting, tax compliance, or tax technology practices, we look at your specific challenges to find the perfect balance between risk and reward.