UPDATED WayFair post from January 2018 for new information: Wayfair: We’ve Got Just What You Need (to Know)
By: Jennifer Stripling, Tax Manager
Jennifer is a tax manager, a member of the JMF Tax Department and in an integral part of the JMF State and Local Tax (SALT) group. With over 11 years of experience, she assists clients with corporate, partnership, and individual income tax reporting as well as complex multi-state income and sales tax issues.
The U.S. Supreme Court’s decision in the South Dakota v. Wayfair, Inc., et al. has a significant impact on Alabama’s sales and use tax compliance. The decision of this case eliminated the “physical presence” requirement and created major change in the sales tax collection and remitting responsibilities of businesses that sell retail over state lines through e-commerce.
Alabama had already begun to challenge the physical presence standard by adopting an economic nexus standard, effective January 1, 2016. This regulation provides out-of-state sellers without a physical presence in Alabama, but who are making retail sales of tangible personal property into the state, have a substantial economic presence in Alabama for sales and use tax purposes when, (a) retail sales into the state exceed $250,000 and (b) the seller conducts various solicitation activities.
The Alabama Department of Revenue published guidance on the impact of the Wayfair case on July 3, 2018. The article states, the economic nexus standard effective January 1, 2016 will be applied prospectively for sales made on or after October 1, 2018. This implies that the Department will not try to apply the standard retroactively to those who did not voluntarily comply. It also instructs remote sellers with annual Alabama sales in excess of the rule’s $250,000 exception to register for the Alabama Simplified Sellers Use Tax Program, or SSUT, and begin collecting and remitting no later than October 2, 2018.
This guidance indicates the Department is moving toward more aggressive economic nexus standard after the Supreme Court ruling in the Wayfair case. The Department stated it will continue to study these changes and intends to engage the rule making process to develop additional long-term guidance on the impact of Wayfair.
If you have any questions, please do not hesitate to reach out to your JMF Accountant or the JMF State and Local Tax Team directly.