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