Let’s face it; the ‘Mayfair Decision’ by the U.S. Supreme Court has had various interpretations on how it affects the U.S. intrastate commerce and taxation. Today, we are going to drill down to the bottom-line of the decision made. To start with, let’s have a quick tour on the ruling: on June 21, 2018, the Supreme Court of the United States ruling on Wayfair vs South Dakota that allows the states to levy taxes on the companies based on economic activity regardless of the physical presence of the company.
Besides, the court also had a majority opinion that South Dakota law did not have an unreasonable burden on the retailers due to the following:
- South Dakota cannot look back and ask for remittance and collections of the sales as well as taxes on the items already purchased
- The merchants who have a reasonable amount of business are supposed to collect taxes
- South Dakota is among the states which adopted the Streamlined Sales and Use Tax Agreement.
To make this article more enlightening, let’s dive into the three distinct challenges related to internet tax and reasons why NetSuite customers will be considering a time-saving and cost-effective integration to make the adjustment procedure easier.
- Economic Activities Vary from State to State
The most common way to come up with an economic nexus is through transactions and sales thresholds. According to JDSupra.com, thresholds generally range from $100k to $250k gross revenue for taxable services and goods. If your company is not within the range, then you are safe.
However, a state can have varying ways and standards of levying taxes on remote sales such as affiliate nexus, cookie nexus and click-through nexus. Besides, there are also some states which tax electronically transferred products.
- Different Transactions are Ideal for Sales and Use Taxes
The classification of transactions that are meant for sales and use tax vary from state to state. For instance, some states can classify “retail sales” as taxable while other states are ambiguous in claiming that “sale of intangible property, tangible personal property or services” are subject to taxes. Therefore, the difference between the states seems to be a major challenge in ensuring the rule is fully functional.
- New Requirements for Conducting Business
The way of running a business has completely changed due to the ‘Mayfair decision. Every business institution has to completely track and monitor its transaction. Unlike before, businesses did not have to worry about the taxes in the state where they do not have a physical presence. This makes the way of running a business quite challenging because one has to be accountable for every sale and transaction regardless of the geographical location where the business took place.
In a nutshell
As a NetSuite SuiteCommerce customer, you have to understand how the internet tax is being carried out in every state. Now you have a clear overview of how the ‘Mayfair Decision’ came about. The only thing you need to do in your business is to make sure that you can account for every transaction and sale.
To find out more about the Wayfair decision and its effects on Oracle | NetSuite ERP & SuiteCommerce customers, as well as more information about how to solve for the challenges presented above, write to the Seibert Consulting Group at hello@seibertconsulting.com or text us at 510-962-7465
