What is the Wayfair Act and how might it impact your e-commerce business? Let’s start by sharing some basic info about Wayfair, in case you have never heard of them.
Wayfair is a home furnishings and décor retailer and offers products for sale online. You can visit their website here (and you will see ads for them all the time henceforth…they are amazing at online marketing and re-marketing.)
In the wake of recent legislation against Wayfair, now commonly referred to and known as the Wayfair Act, this new ruling requires sellers of goods or services into South Dakota to collect state sales tax at the time of purchase. The ruling states that South Dakota can now require internet retailers to collect sales tax on purchases by South Dakota buyers, even if the retailer lacks a physical presence in the state.
That said, you should also know that Internet purchases are not exempt from sales tax, but in many cases, it looks that way to consumers.
In the early days of retailing online, e-commerce businesses typically only had to collect a state’s sales tax from buyers if the company had property or employees in that state. As of 2018, state sales taxes are collected on about half of e-commerce transactions because sales tax collection was only imposed if the retailer had a physical presence in the state.
This new law sets a legal precedent and establishes a framework for other states to enact or alter laws concerning taxing internet sales. In the near future, other states could require retailers located outside of their borders (online retailers) to collect sales and use taxes subject to certain restrictions.
We wanted to make you aware of this to ensure that you are compliant with the local and other state laws to help protect your business. If you are not sure how to apply sales tax changes to your e-commerce shopping cart or online store, please reach out to us.