We’ll surf through crowds to get our hands on the newest flatscreen tv.
Like most Americans, we rush to get deals on Black Friday, or even better Cyber Monday. However, taxpayers rely heavily on Cyber Monday to buy the items they have on their wishlist because if an online retailer doesn’t have a physical presence in our state, we’re not required to pay any sales tax.
Nonetheless, consumers might notice a difference in the amount in their sales tax (depending on where they live) because of a Supreme Court ruling passed in June 2018.
E-commerce retailers are now required to collect sales tax from online purchases.
Prior to this, online retailers did not have to collect sales tax if they did not have a physical presence in your specific state. In the case of South Dakota v. Wayfair Inc., South Dakota was imposing its sales tax because of their loss of revenue (which would come from sales tax) from internet retailers.
Two terms are important when referring to this change:
- Nexus – a state can issue a business to pay its taxes
- Physical nexus – property, payroll, inventory in the state, or a resident employee working from home
The Supreme Court overturned the physical nexus and establishes a minimum threshold of $100,000 for sales and 200 transactions within South Dakota to collect sales tax. This led to the Supreme Court granting states the ability to tax any business in the country.
Why am I subject to the sales tax?
Like South Dakota, since states without a physical nexus weren’t required to collect sales tax, states were losing revenue from this process. In actuality, consumers have to pay the sales tax to their state if retailers are not collecting it. That being said, sales taxes were not being paid.
Now, each state can set their own thresholds, taxability based on their products, and the dates they will put it into action. It is estimated that the government could receive between $8 billion to $13 billion because of this change.
10 states have already adjusted their sales tax.
| State | Threshold | Transactions | Date Effective |
|---|---|---|---|
| Georgia | $250,000 | 200 | January 1, 2019 |
| Indiana | $100,000 | 200 | October 1, 2018 |
| Iowa | $100,000 | 200 | January 1, 2019 |
| Kentucky | $100,000 | 200 | October 1, 2018 |
| Minnesota | sales of at least 10 that total more than $100,000 | 100 in any period of 12 consecutive months | October 1, 2018 |
| New Jersey | $100,000 | 200 | October 1, 2018 |
| North Dakota | $100,000 | 200 | October 1, 2018 |
| Utah | $100,000 | 200 | January 1, 2019 |
| Vermont | $100,000 | 200 | July 1, 2018 |
| Wyoming | $100,000 | 200 | October 1, 2018 |
Unlike the states above, these states still need to establish a minimum threshold to practice the collection of sales tax. The rest of the states not on the list have yet to make legislative changes.
- Arkansas
- Kansas
- Michigan
- Minnesota
- Nebraska
- Nevada
- North Carolina
- Ohio
- Oklahoma
- Rhode Island
- Washington
- West Virginia
- Wisconsin
You have the rest of your day to finish your shopping.
If you see a little extra sales tax from now on for Cyber Monday, you now know why. Keep updated with your state by checking your state department of revenue’s FAQ section dedicated to sales tax or the website in general.
Don’t forget to file your taxes to get your refund; especially since holiday shopping isn’t over!
Tags: black friday, cyber monday, sales tax, sate and local taxes, South Dakota v. Wayfair, use tax, wayfair decision
