South Dakota v. Wayfair, Inc.
On June 21, 2018, the United States Supreme Court fundamentally changed the rules for collection of sales tax by Internet-based retailers. In its decision in South Dakota v. Wayfair Inc., the Court effectively stated that individual states can require online sellers to collect state sales tax on their sales. This ruling overturns the Court’s 1992 decision in Quill Corporation v. North Dakota. The Quill case prohibited states from requiring a business to collect sales tax unless the business had a physical presence in the state.
For many years, states argued that they were losing a lot of money by not being able to collect sales tax on Internet sales to customers located in their states. Formerly the burden was on the customer rather than the seller to pay the relevant tax. In that case, the tax generally is called use tax rather than sales tax – and customers often simply did not pay use tax to the state.
New Sales Tax Rules for Remote (Online & Offline) Purchasing
If you are buying on the Internet in various states around the country, you will now be required to pay state taxes on merchandise purchased remotely (online and offline) in states which have enacted laws requiring the collection of sales tax by online sellers. In order for a given state to require online sellers to collect sales tax, that state must pass a law allowing it to do so.
Many states already have enacted new laws. Often, these laws refer to online sellers as “remote sellers.” In most cases, if a remote seller has either:
- a minimum number of separate sales to customers in the state; or
- a minimum dollar amount of sales to customers in the state,
the law requires the seller to collect and pay sales tax. In addition, the seller should be registered with the state’s taxing authority.
States Affected & Sales Tax Rates
As of today, 46 states now collect sales taxes on internet transactions. Below is a list of states, effective date and respective sales tax rates. If your state is not listed below, state taxes will not be collected for your purchase.
- Alabama: 4% | Effective date: 10/01/2019
- Arizona: 5.6% | Effective date: 10/01/2019
- Arkansas: 6.5% | Effective date:07/01/2019
- California: 7.5% | Effective date: 04/01/2019
- Colorado: 2.9% | Effective date: 06/01/2019
- Connecticut: 6.35% | Effective date: 12/01/2018
Florida: This law this not affect Florida, however, we are a Florida registered business, therefore, state taxes do apply for purchases made in our state (6%).
- Georgia: 4% | Effective date: 01/01/2019
- Hawaii: 4% | Effective date: 07/01/2018
- Idaho: 6% | Effective date: 06/01/2019
- Illinois: 6.25% | Effective date: 10/01/2018
- Indiana: 7% | Effective date: 10/01/2018
- Iowa: 6% | Effective date: 01/01/2019
- Kansas: 6.5% | Effective date: 10/01/2019
- Kentucky: 6% | Effective date: 10/01/2018
- Louisiana: 4.45% | Effective date: 07/01/2020
- Maine: 5.5% | Effective date: 07/01/2018
- Maryland: 6% | Effective date: 10/01/2018
- Massachussets: 6.25% | Effective date: 10/01/2019
- Michigan: 6% | Effective date: 09/30/2018
- Minnesota: 6.875% | Effective date: 10/01/2018
- Mississippi: 7% | Effective date: 09/01/2018
- Nebraska: 5.5% | Effective date: 01/01/2019
- Nevada: 4.6% | Effective date: 10/01/2018
- New Jersey: 6.625% | Effective date: 11/01/2018
- New Mexico: 5.125% | Effective date: 07/01/2019
- New York: 4% | Effective date: 06/21/2018
- North Carolina: 4.75% | Effective date: 11/01/2018
- North Dakota: 5% | Effective date: 10/01/2018
- Ohio: 5.75% | Effective date: 08/01/2019
- Oklahoma: 4.5% | Effective date: 11/01/2019
- Pennsylvania: 6% | Effective date: 07/01/2019
- Rhode Island: 7% | Effective date: 07/01/2019
- South Carolina: 6% | Effective date: 11/01/2018
- South Dakota: 4.5% | Effective date: 11/01/2018
- Tennessee: 7% | Effective date: 07/01/2019
- Texas: 6.25% | Effective date: 10/01/2019
- Utah: 4.85% | Effective date: 01/01/2019
- Vermont: 6% | Effective date: 07/01/2018
- Virginia: 4.3% | Effective date: 07/01/2019
- Vermont: 6% | Effective date: 07/01/2018
- Washington: 6.5% | Effective date: 10/01/2018
- Washington, D.C.: 5.75% | Effective date: 01/01/2019
- West Virginia: 6% | Effective date: 01/01/2019
- Wisconsin: 5% | Effective date: 10/01/2018
- Wyoming: 4% | Effective date: 02/01/2019
To find out more about the requirements in your state, check with your state’s taxing authority.