South Dakota v. Wayfair Inc. opens up challenges for foreign inbound Companies

United States is an attractive place to do business and multinational companies from various countries have operated successfully over a number years. Many foreign inbound companies operate either remotely or by physical presence in United States and are selling in number of states. Until recently these companies were advised by the experts that they were not required to register and collect sales tax in number of states based on their activity due to the protection accorded by the then governing case Quill v. North Dakota. But now this is the thing of the past. On June 21, 2018 the SCOTUS (Supreme Court of United States) determined the physical presence rule was “unsound and incorrect,” and “economic and virtual” contacts between a business and a state were sufficient grounds for nexus – the connection between a state and a business that triggers a tax collection obligation.
Once a business determines it’s reached an economic nexus threshold in a new jurisdiction and has an obligation to collect, it must register to do so with the state tax authority. Under no circumstances should it collect and remit tax in a new jurisdiction before registering to do business there. More than one license and permit may be required in each jurisdiction, and in some states, it may be necessary to register with local tax authorities, as well as the state taxing authority. As a result, registering in a new jurisdiction is likely to be a multi-step process that involves multiple departments, including state and local tax departments, and the secretary of state.
Affected foreign owned businesses must consult and seek help from the advisors in order to avoid playing afoul as non-compliance can be very costly.

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