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"Wayfair Creep" Could Majorly Impact Your Tax Bill

by
Rebekah Barton
on
7/27/2022
"Wayfair Creep" Could Majorly Impact Your Tax Bill

In 2018, the verdict in the well-known South Dakota v. Wayfair court case changed how out-of-state businesses are allowed to collect taxes from consumers.

The American Institute of Certified Public Accountants (AICPA) summarizes the case as:

The United States Supreme Court ruled 5-4 in South Dakota v. Wayfair that states can mandate that businesses without a physical presence in a state with more than 200 transactions or $100,000 in-state sales collect and remit sales taxes on transactions in the state

It is important to note that this decision overturned two prior rulings -- Quill v. North Dakota (1992) and National Bellas Hess (1967) -- but is not retroactive. This means that South Dakota can't collect back tax from Wayfair.com and other retailers.

The impact of South Dakota v. Wayfair has never been more far-reaching than it is now. Amid the COVID-19 pandemic, which began in earnest in the United States in March 2020, more Americans than ever before turned to online shopping to make purchases during quarantine and self-isolation.

Via Accounting Today, the most recent Bloomberg Tax & Accounting Survey of State Tax Departments has discovered that "states are increasingly emboldened about imposing nexus on out-of-state entities, both in sales tax and corporate income tax."

This national retail phenomenon is referred to as the "Wayfair creep," an allusion to the way that the 2018 Wayfair sales tax verdict has crept into the consciousness of modern American retail operations.

Practice lead for state tax at Bloomberg, Emilie Burnette, told AT, “We addressed nexus policies for both income and sales and use taxes and the sourcing of receipts for income tax purposes." 

This year, a large majority of states, plus Washington D.C., participated in both the income tax and sales tax portions of Bloomberg's questionnaire.

Entrepreneur also reported on Bloomberg's recent findings, noting that the widespread implementation of nexus laws for small business retailers who sell remotely -- as well as for "big guns" like Amazon, eBay, and Etsy -- will continue to have notable financial consequences. 

If you run a small to mid-size retail website, for example, you could find yourself owing tens of thousands of dollars more in taxes over the coming years.

To mitigate the potential for sticker shock, make sure you familiarize yourself with voluntary disclosure polices and remote seller laws in each state where you have customers. 

What do you think about the "Wayfair creep"?

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Rebekah Barton

Rebekah Barton

Rebekah's search engine optimization career began completely by accident as a college student. Over the course of her career so far, she has "grown up" with the SEO industry, from writing content while juggling classes to managing her own teams of writers and overseeing SEO strategy in subsequent roles. She is excited to bring her passion for high-quality content to CountingWorks, Inc.

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