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US sales tax foreign sellers – goods & digital services

South Dakota vs Wayfair Supreme Court 2018 – tax obligations on remote sellers and marketplace platforms

The US Supreme Court in South Dakota vs Wayfair ruled 21 June 2018 that states may now for the first time impose sales tax obligations on out-of-state or foreign sellers and facilitating marketplaces. This will include selling thresholds, but will mean sellers or marketplaces without a physical nexus (staff, facilities, or stocks) are now liable to state sales tax if selling remotely.

See end if this blog for a live listing of sales tax registration thresholds for goods, and the rules on digital services

Addition of Economic Nexus to Physical Nexus test

The Wayfair ruling has established that states don’t have to rely just on the physical nexus test for taxing obligations – does the seller have staff, shops, facilities or stocks in-state. The case added the Economic Nexus option whereby merely selling over the internet to shoppers in another state would mean sales tax obligations.

It is expected that over 40 of the 45 states that impose a sales tax will adopt the Physical Nexus test on remote sellers – including foreign merchants.

Sales tax registration thresholds – safe harbour

The South Dakota case included the state operating an annual sales registration threshold, below which the seller or marketplace did not need to apply the local sales tax. This is:

  1. $100,000 in sales; and / or
  2. At least 200 transactions

Most states following South Dakota will impose these thresholds – although it is not obligatory.

US Sales Tax rates and selling thresholds

State State sales tax rate Remote seller annual thresholds Digital services taxable?
$ threshold Transactions threshold
Alabama 4% 1 Oct 2018 $250,000 Yes
Alaska 0% - n/a No state-wide tax
Arizona 5.6% 1 Oct 2019 $100,000 - Yes
Arkansas 6.5% 1 July 2019 $100,000 200 transactions Yes
California 7.25% 1 April 2019 $500,000 - No
Colorado 2.9% 1 Dec 2018 $100,000 - Yes
Connecticut 6.35% 1 Dec 2018 $100,000 200 transactions Yes
Delaware 0.0% - n/a No state sales tax
Florida 6.0% 1 July 2021 $100,000 - No Communications Tax. E-books exempt
Georgia 4% 1 Jan 2019 $100,000 200 transactions No
Hawaii 4% 1 July 2018 $100,000 200 transactions Yes General Excise Tax
Idaho 6% 1 June 2019 $100,000 Yes Software exempt
Illinois 6.25% 1 Oct 2018 $100,000 200 transactions No
Indiana 7% 1 Oct 2018 $100,000 200 transactions Yes
Iowa 6% 1 Jan 2019 $100,000 - Yes
Kansas 6.5% 1 July 2021 $100,000 - No
Kentucky 6% 1 Oct 2018 $100,000 200 transactions Yes
Louisiana 4.45% 1 July 2020 $100,000 200 transactions Yes
Maine 5.5% 1 July 2018 $100,000 - (since 2022) Yes
Maryland 6.0% 1 Oct 2018 $100,000 200 transactions Yes
Massachusetts 6.25% 1 Oct 2018 $100,000 No
Michigan 6.0% 30 Sep 2018 $100,000 200 transactions No
Minnesota 6.875% 1 Oct 2018 $100,000 200 transactions Yes
Mississippi 7.0% 1 Sep 2018 $250,000 - Yes
Missouri 4.225% 1 Jan 2023 $100,000 - No
Montana 0.0% - n/a No state sales tax
Nebraska 5.5% 1 April 2019 $100,000 200 transactions Yes
Nevada 6.85% 1 Oct 2018 $100,000 200 transactions No
New Hampshire 0.0% - n/a
New Jersey 6.625% 1 Nov 2018 $100,000 200 transactions Yes
New Mexico 5.125% 1 July 2019 $100,000 - Yes
New York 4.0% 21 July 2018 $500,000 100 transactions No
North Carolina 4.75% 1 Nov 2018 $100,000 200 transactions Yes
North Dakota 5.0% 1 Oct 2018 $100,000 - No
Ohio 5.75% 1 Aug 2019 $100,000 200 transactions Yes
Oklahoma 4.5% 1 Nov 2019 $100,000 - No
Oregon 0.0% - n/a No state sales tax
Pennsylvania 6.0% 1 July 2019 $100,000 Yes
Puerto Rico 10.5% 1 Jan 2021 $100,000 200 transactions Yes
Rhode Island 7.0% 1 July 2019 $100,000 200 transactions Yes
South Carolina 6.0% 1 Nov 2018 $100,000 - No
South Dakota 4.5% 1 Nov 2018 $100,000 200 transactions Yes
Tennessee 7.0% 1 July 2019 $100,000 - Yes
Texas 6.25% 1 Oct 2019 $500,000 - Yes Only if physcial equivilaent is taxable (e.g. books)
Utah 4.7% 1 Jan 2019 $100,000 200 transactions Yes
Vermont 6.0% 1 July 2018 $100,000 200 transactions Yes
Virginia 4.3% 1 July 2019 $100,000 200 transactions No
Washington 6.5% 1 Oct 2018 $100,000 - Yes
Washington, DC 6.0% 1 Jan 2019 $100,000 200 transactions Yes
West Virginia 6.0% 1 Jan 2019 $100,000 200 transactions Yes Streaming services only
Wisconsin 5.0% 1 Oct 2018 $100,000 - (since 2021) Yes
Wyoming 4.0% 1 Feb 2019 $100,000 200 transactions Yes

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