BDO Explains Impact of South Dakota v. Wayfair Ruling

On June 21, 2018, the Supreme Court of the United States issued its widely anticipated decision in South Dakota v. Wayfair. In a 5-4 decision, the Court held that the physical presence rule for state tax jurisdiction is incorrect and a not a requirement under the Commerce Clause of the U.S. Constitution.

BDO, one of the nation’s leading accounting and advisory firms, recently published insights into what is likely the most significant state tax decision for the Court in at least 50 years:

• Wayfairis a watershed moment in state taxation. The decision will have wide-ranging implications for all businesses, not just internet retailers, as well as consumers, and state and local governments.
• Overnight, Wayfair changes a remote seller’s considerations from “do I have physical presence” to “how do I comply with all of the state and local jurisdictions where I deliver my products or services?”
• Almost half of the states that impose sales and use taxes had economic nexus statutes similar to South Dakota’s prior to the Wayfair.  It is reasonable to expect that most, if not all, of the remaining states that impose sales and use taxes will now go this route.
• The decision is also sure to embolden states that have been imposing economic nexus for income tax purposes for a number of years and is supportive of economic “factor-presence nexus” statutes that some states have enacted in recent years.
• Taxpayers affected by the Wayfairdecision should consult with their financial statement auditor and tax advisor to evaluate and determine the potential financial statement implications under ASC 740, including the impact on current and deferred taxes, uncertain tax benefits, and disclosures, as well as with respect to sales/use and indirect taxes under ASC 450, including impact on reserves and accruals.

A more in-depth analysis of the Court’s Wayfair opinion and some additional thoughts on the impact of the ruling are available in BDO’s recent State and Local Tax Alert. If you are interested in speaking with a BDO professional regarding how the outcome will affect your business, contact Tampa Tax Managing Partner, Jennifer Spooner – [email protected].

Categorized in: Work

This post was written by Elevate, Inc.