Internet Sales Tax Changes

At the end of June, the U.S. Supreme Court ruled that individual states could require online retailers who are selling products within their borders to collect and remit sales tax. Up until this time, online retailers were only required to remit sales tax in states that they had a physical presence in. For example, if your business is located in Wyoming and you make a sale online to a Wyoming resident you would be responsible for collecting that sales tax on behalf of the state of Wyoming. If you made a sale in Colorado, however, you would not be responsible for Colorado’s sales tax on your sale.

South Dakota vs. Wayfair, Inc. moves to close this loophole—ruling that online retailers can be required to collect sales taxes even in states where they do not have a physical presence. In the grand scheme of things, this is a huge win for our Main Street businesses that have been forever at a disadvantage in being required to collect sales tax, when large eCommerce platforms (like Amazon and Wayfair) are not. It is important to note that Amazon has independently set a precedent over the number of years to collect and remit sales tax in all of the states that it delivers to.

This is also a win for our state economy, as it is possible there are billions of dollars being left on the table in tax revenue for the state. South Dakota is the first to pass a law requiring online retailers that sell more than $100,000 of cash sales or do over 200 transaction in their state annually to collect and remit sales tax. Though South Dakota is the first to act, we can assume that more states will follow suit, as 38 states and the District of Columbia signed onto a letter of support for South Dakota’s claim.

It is important to keep in mind that 31 states in the U.S. currently have some kind of law on the books about taxing online sales, however, they are complicated and hard to track. The current thinking is that states will follow the South Dakota law and work to simplify their tax structure to have similar guidelines and support for online retailers in this transition.

If you are a small business and currently selling through an eCommerce platform like WooCommerce, WIX, or Squarespace, you can expect that these companies are working to make the necessary updates to keep their customers in compliance with these changing laws. What can you do right now? Reach out to your local legislator and ask questions about what Wyoming has planned in response to this ruling. You should also check in with your website developer, website host, or design platform to see how they are going to handle the upcoming changes.

This is something that the Wyoming Small Business Development Center Network will be watching. If you need help preparing your online store for these changes, we can help! Contact your local advisor right now on our by clicking here.

ABOUT THE AUTHOR: Sarah Hamlin is the regional director for Fremont and Teton Counties. Sarah has a marketing and operations background with a bachelor’s degree from the University of Denver and an MBA from Colorado State University. Her love for helping small business started when she was in high school working for the local, family-owned sporting goods store in northeast Ohio. Sarah specializes in social media and digital marketing, working with clients statewide to get their businesses online.

When she’s not meeting with clients or on the road, Sarah is plotting mountain and river adventures with her husband and three-legged pup, experimenting in the kitchen, and volunteering in the Lander community.