Supreme Court precedent once prohibited states from collecting sales tax from out-of-state businesses lacking an in-state physical presence, no matter how much the company made in sales—but this has recently changed.
With the United States Supreme Court decision in South Dakota v. Wayfair, Inc., individuals and businesses that sell products out of state are liable to pay the states where they sell their products taxes if they reach a certain income threshold for their sales.
If you are selling products out of state, you may be liable to pay taxes on those sales even if the amount of money you received for them is relatively small.
Which activities of an out-of-state seller constitute Income Tax Nexus?
There is some amount of protection for those who sell products out of state, as federal law protects those who sell physical items out of state from taxation if they meet the following criteria:
- The only activity within the state is soliciting sales of tangible personal property
- Sales are approved by the home office outside of the customer’s state
- The tangible personal property is shipped to the customer from outside of the state
Need assistance? Contact us.
If you’re unsure whether or not you need to pay taxes on your out-of-state sales, Smolin can help. Let us walk you through the process so you don’t have to second guess anything this tax season.