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South Dakota Vs. Wayfair and Your Business

Dozens of manufacturing financial executives heard a pretty clear message at Gilmore Jasion Mahler’s (GJM's) fall Manufacturing & Distribution Financial Executive Roundtable events: don’t assume you’re unaffected by the recent South Dakota vs. Wayfair ruling by the U.S. Supreme Court.

If you haven’t heard about the Wayfair case, or aren’t sure what it’s all about, here’s a quick explainer.

South Dakota vs. Wayfair

The U.S. Supreme Court ruled in June that states can charge sales tax on purchases from out of state companies regardless of whether those companies have a physical location in the taxing state. The ruling upended a case from 1992 (Quill Corp. v. North Dakota) that said a seller had to have a physical presence in the state to be subject to state sales tax. The court cited the significant increase in online purchases over the last 25-plus years in its decision.

Many manufacturers are still trying to wrap their head around what sort of impact the ruling could have on their businesses.

This week, a pretty clear message from GJM roundtable guest presenter Bill Vohsing. He is a state and local tax expert from the Columbus office of RSM US LLP. GJM is a member of the RSM US Alliance. Vohsing says all businesses need to pause, ask themselves some questions, and consider some actions:

  1. Do a nexus analysis. Determine where you should be paying tax.
  2. What’s your sales footprint? Where do you do business? Make sure you understand sales thresholds.
  3. Know your products/services. What’s taxable in one state may be exempt in another.

Vohsing’s to do list for businesses includes some urgent items and some things to keep in mind.

Immediate actions include:

  • Consider ASC 450 – examine any previous noncompliance with sales tax nexus regulations
  • Look into automation: should you automate your tax compliance? Make sure you are using the right technology tools

Recommended actions include:

  • Stay on top of state legislative activity post-Wayfair. New sales tax laws are likely on the way
  • Re-evaluate how you handle sales tax collection. Some businesses may want to move to nationwide collection as a proactive move
  • Re-evaluate current strategies in place to avoid sales and use tax obligations and perhaps hit the pause button until there’s more clarity from the Supreme Court

Other things to think about:

  • Do you have a sales team? Do you know what they do and where they travel?
  • What kind of mobile assets do you have?
  • Evaluate your exemption certificates. Do you need to expand the way you track and manage?

Vohsing also says be aware more states will follow South Dakota in the attempt to collect sales tax. Some are already taking action, and while many other state legislatures are adjourned for the year, he says you can expect them to address the issue when they reconvene.

For further guidance on how to proceed post-Wayfair, and address the specifics related to your business, we encourage you to reach out to your GJM team to start the discussion.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting services and provides comprehensive services including assurance, business advisory, tax, risk advisory and healthcare management. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.