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South Dakota v. Wayfair, Inc.: How Your Small Business Sales Tax Accounting Is Affected

If you are an online retailer or another business that sell products out of state, South Dakota v. Wayfair could affect how sales tax is collected on your products. E-commerce companies have been able to operate free of sales tax for years, frequently giving them an advantage over other stores. Many of these businesses will now have to adjust how they operate and conduct their accounting. Learn how your small business sales tax accounting is affected by South Dakota v. Wayfair, Inc., and what you can do about these changes today.

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South Dakota v. Wayfair, Inc.

South Dakota v. Wayfair, Inc., is a landmark ruling of the United States Supreme Court issued in June 2018. The issue at hand in this case is whether a state can require a business with no physical presence in that state to collect sales tax on purchases made by its residents. The prior Supreme Court precedent had determined that a business must have a physical presence in that state in order to be compelled to collect sales tax on the state’s behalf. If a business had no physical presence in the state, it was not required to collect any sales tax on purchases.

South Dakota v. Wayfair paved the way for states to receive sales tax on purchases made by their residents from out-of-state businesses. South Dakota argued in this case that it was suffering irreparable injury by being denied the ability to collect sales taxes on these purchases. Writing for a 5-4 majority, Justice Kennedy stated that the prior Court precedent was unsound and should be overturned. The Court held that circumstances had changed since the prior decision, insofar as the volume of mail order sales have surged. The Court held that the “physical presence” standard favored remote sellers at the expense of states.

This decision could have enormous implications for small business tax accounting, because businesses will have to track all sales and make payments to those states that will now impose taxes on Internet sales. In most instances, this could mean drastically expanding your recordkeeping requirements.

Complicated Small Business Taxes Made Easy

Even small businesses are required to pay several types of taxes. In addition to sales tax, you may be liable for use taxes, property taxes, payroll taxes, and income taxes. In order to effectively engage the services of an accountant, a small business must have impeccable records. If not, you risk wasting an inordinate amount of time when meeting with your accountant, which will cost you more money. The better prepared you are, the easier it is to be helped by an accountant, especially in the face of these recent changes to state sales tax collection.

Tower Books can prepare and file your sales tax returns and help you prepare to meet with a tax accountant by providing expert, accurate, and timely bookkeeping. We bring your books up to date and maintain them so you can spend your time running your business. By using secure, cloud-based technology, we can work with you regardless of where you are located and make sure you can access your books from anywhere.

We offer three different levels of bookkeeping services, which are customizable based on your priorities. Tower Books can import all of your business transactions from a variety of sources, categorize your transactions, and prepare monthly financial statements for your business. We can also handle bill paying, invoicing, filing timely sales tax returns, payroll, employee benefit plans, custom reporting, and more.

Our services can help you comply with any new state tax laws that may result from the South Dakota v. Wayfair decision. We may also be able to help you determine if your business is eligible for any exemptions to these laws. For instance, the South Dakota law discussed in South Dakota v. Wayfair did not apply to merchants that earned less than $100,000 in revenues from sales in the state.

Contact Tower Books for Bookkeeping Help Today

Operating across state lines is about to become more complicated. It remains to be seen how states will act in the wake of the Court’s decision and whether they will exempt small businesses or not. Contact Tower Books to find out how our bookkeeping services can help you gain valuable insight into your small business, prepare to meet with your tax accountant, and adjust to any new laws that result from South Dakota v. Wayfair.