In the ever-expanding world of eCommerce, businesses are constantly seeking new opportunities to reach customers across borders – and the $1 trillion US market is the ultimate destination.
For non-US eCommerce businesses selling to retail customers in the United States, it is crucial to be aware of the potential sales tax obligations that may arise.
The groundbreaking Supreme Court case of Wayfair vs. South Dakota has given US states the authority to impose sales tax on out-of-state sellers, bringing about a significant shift in tax legislation. Unfortunately, many eCommerce sellers remain unaware of this obligation due to its relatively recent implementation.
The Wayfair vs. South Dakota Case:
In 2018, the US Supreme Court issued a ruling in Wayfair vs. South Dakota that granted states the power to require out-of-state sellers to collect and remit sales tax, even if they do not have a physical presence in the state. This includes businesses established outside the USA. This decision overturned the previous requirement that a business must have a physical presence, such as a store or warehouse, in a state in order to be subject to sales tax.
Sales Tax Obligations for Non-US eCommerce Businesses:
As a result of the Wayfair ruling, non-US eCommerce businesses that sell to US retail customers may now have sales tax obligations in various states. Each state has the authority to determine its own sales tax laws and thresholds, which can lead to a complex web of requirements for businesses to navigate. It is essential for eCommerce sellers to understand that selling online does not exempt them from these obligations.
Risks of Non-Compliance:
Non-compliance with US sales tax obligations can have severe consequences for eCommerce businesses. States have the authority to assess penalties, interest, and other fees for late or incorrect filings. Furthermore, the failure to meet sales tax obligations can result in the suspension or closure of the seller’s online store, leading to significant revenue loss and damage to the business’s reputation.
The Role of Third-Party Providers:
Many eCommerce sellers assume that their accountant or finance team can handle sales tax compliance. However, the complexity of sales tax rates and ever-changing nature of US sales tax legislation makes it virtually impossible to remain fully compliant without the assistance of a third-party provider who possesses the necessary expertise and technology.
Engaging with a third-party provider specialising in US sales tax compliance is crucial to ensure accurate and timely registration, calculation of taxes, and filing of tax returns. These providers are equipped with the knowledge and tools to navigate the complexities of each state’s sales tax laws, enabling eCommerce businesses to focus on serving their customers and growing their brand.
Non-US eCommerce businesses selling to retail customers in the United States must recognize the potential sales tax obligations that may arise following the Wayfair vs. South Dakota Supreme Court case. The risks of non-compliance, including penalties, interest, and potential store closures, make it essential for businesses to engage with a third-party provider specialising in US sales tax compliance. By doing so, eCommerce sellers can ensure accurate and timely adherence to US sales tax legislation, safeguarding their business’s financial health and reputation in the US market.