US Supreme Court Ruling Impacting Non-US Companies Selling into American Market
By Darlene Hart and James Debate, US Tax & Financial Services
A US Supreme Court ruling last June is expected to impact every company that sells goods or services into the US within months, or even weeks and days. In many places, it has already begun.
The ruling, South Dakota vs Wayfair, is considered precedent setting because of its finding that US states may charge tax on purchases made to individuals and businesses within their borders by out-of-state sellers, even if these sellers don’t have a physical presence in the state. (Wayfair is an NYSE-listed e-commerce company based in Boston (MA). Two other defendants in the case, Overstock. com Inc. and Newegg, Inc., are also US-based internet retailers.)
Until the Supreme Court’s decision, states had the authority to impose a sales-tax collection obligation only on businesses that were physically present within their borders.
The “Wayfair decision” is seen as affecting e-commerce companies in particular, as many of these businesses have enjoyed a significant competitive advantage over their bricks-and-mortar retail rivals until now, because of this physical presence requirement.
Perhaps not surprisingly, the fact of this discrepancy in the need to collect and remit sales taxes, and the disadvantage it created for in-state, sales-tax-collecting, bricks-and-mortar retailers, was a major contributing factor behind calls for a change in the law.
Nor are such concerns unique to the US.
Darlene HartUS Tax & Financial Services, Zurich, Switzerland
T: +41 44 387 8070
Published: GGI Insider, No. 102, July 2019 l Photo: industrieblick - stock.adobe.com