The U.S. Supreme Court’s June 21 decision that states can assert nexus for sales and use tax purposes without requiring a seller’s physical presence in the state is expected to have a major impact on U.S. retail business.
“It completely changes the game for accountants and Internet-based businesses as well as regular brick and mortar businesses,” said OSCPA member Adam Garn, CPA, JD, MT.
Garn and three other federal tax experts – Steve Dimengo, J.D., CPA, MT; Mary Jo Dolson, CPA; and Rich Fry, J.D., MT – joined us to discuss the ruling on the latest episode of our podcast, The State of Business with The Ohio Society of CPAs.
The court decision in South Dakota v. Wayfair overturns prior Supreme Court precedent in cases from 1967 and 1992, both of which held that states could not require sellers to collect sales taxes unless they had a physical presence in that state. The Court concluded that each decision was an incorrect interpretation of the Commerce Clause.
“All the justices said, effectively, that they don’t agree with the prior decisions, but they still want to respect them because they had been issued and everybody’s relied on them for fifty-plus years,” Dimengo said. “So, I was surprised, and I think that is reflected even in the decision; it was a 5-4 decision in favor of the states.”
Listen to the podcast now to hear more, including why the ruling might not be the boon for local business that some have predicted.