Online retailers who were once immune to sales tax under the doctrine of Quill Corp. v. North Dakota, which required physical presence in the state in order for the state to a levy sales and use tax, will begin to feel the bite of sales tax levies, as states update their sales and use tax laws in the wake of the recent Supreme Court decision in South Dakota v. Wayfair, Inc.
In Wayfair the court ruled South Dakota’s state sales tax nexus law constitutional, even though no physical presence was required. South Dakota’s economic nexus provision imposes a sales tax registration and filing obligation on any out-of-state retailer lacking a physical presence if they have more than $100,000 in gross sales or 200 or more transactions into the state, and if an out of state retailer exceeds this threshold, they are required to register with the state and collect and remit sales tax.
Many states are modeling new economic nexus provisions after South’ Dakota’s provision, and 30 states plus the District of Columbia have passed laws or approved rules requiring remote sellers to collect sales and use tax. Nearly all state’s which have enacted legislation have followed the first two of the three main principles outlined in Justice Anthony Kennedy’s opinion: (i) a safe harbor for those with limited business in the state, (ii) no retroactive application of the law for past taxes due, and (iii) a state to have membership in the Streamlined Sales and Use Tax Agreement, where sellers voluntarily collect and remit tax to state participants.
Florida has yet to enact a new sales and use tax nexus provision following the Wayfair decision, however, Florida Attorney General Pamela Bondi has stated in an August 9, 2018 court filing, “Wayfair controls the outcome of this matter, and there is no reason that case should not be applied retrospectively as well as prospectively.” This approach may be aggressive, as most states have taken the approach that retroactivity is unconstitutional, relying on Justice Kennedy’s opinion.
While the future of Florida’s sales tax nexus for online retailers remains uncertain, we recommend online retailers reach out to their tax advisors and proactively update their sales and use tax collection and remittance procedures in the wake of the Wayfair decision.