A US Supreme Court ruling in June 2018 (South Dakota v. Wayfair, Inc.) has lowered the bar for sales and use tax nexus in South Dakota. The decision means that a physical presence in the state is no longer required and South Dakota can now require out-of-state sellers to collect and remit sales tax based on economic nexus.
At present, economic nexus thresholds include $100,000 or more in annual sales into South Dakota or 200 or more annual transactions into the state. The new provisions—which came into effect on November 1, 2018—apply to services, products transferred electronically, and the sale of tangible personal property.
Any price advantages that Canadian companies may have once realized from not having to charge sales tax have been eliminated under these new rules.
Other states are likely to follow suit and implement similar changes to their own sales tax rules. This would have a significant impact on how Canadian companies do business in the US and their related US sales tax reporting. If you have sales to the US, you may wish to undertake a state-by-state review to gain a better understanding of your overall exposure.
The dedicated team of tax professionals at S+C Partners LLP are experts in both Canadian and US tax matters and are available to advise you on your US tax reporting obligations.