Corter Moon: "Nexus" And What It Means For Online Businesses
Wednesday, October 9, 2019

"Nexus" And What It Means For Online Businesses

This post is sponsored by DiamondLinks



It is an interesting thing, sales tax. It has kind of always fascinated me in a strange way. I may not be the best at math, but it has always been something that has intrigued me. So when I learned about the Wayfair sales tax exemption, I was quite interested in learning all the more about it. I will share below what I have learned about it, and maybe you will learn a little bit more about it, too. 

It all happened on June 21, 2018. The United States Supreme Court ruled in the South Dakota v. Wayfair, Inc. et al were able to establish something called "nexus," which is "an economic presence that triggers the obligation to collect and remit tax or at least communicate with the appropriate states." The Wayfair case not only involved the popular internet sales company, but also Overstock, and the electronics internet giant, New Egg. 

The court's decision in the case paved the way for other states to mandate that companies that are selling products in that specific state collect sales tax. Why did this happen? You may ask. Simply put, states want their share of money from companies that are making money by selling goods over the internet. They want their cut. 

E-commerce, if you will has only grown in success since the early years of the internet. "The Census Bureau of the Department of Commerce estimates that U.S. retail e-commerce sales for the second quarter of 2019 hit $146.2 billion, an increase of 4.2 percent from earlier in the year." What we are learning from the Wayfair Tax Policy is that no matter how small of a business that you may have on the internet, or even at trade shows these days, states are making sure that sales tax is being collected. 

If you run a small business, especially an online business, this can all be a bit confusing, to say the least. A common mistake made by e-commerce sellers is that they are applying income tax nexus rules to sales tax nexus rules.

Within the years ahead of us, online sellers are going to see the nexus landscape change very much. The tax landscape is something that is constantly and ever-changing. You can learn more about it by clicking here. That website is an invaluable resource for all e-commerce sellers and will help you out to make sense of nexus and taxes. They also have various questionnaires and whitepapers that you can use to learn more about nexus. 

Currently, 45 states have a general sales tax, all but Missouri and Florida tax remote (e-commerce) sales. However, a bill has entered the Florida Legislature to create the 44th state to adopt the "economic nexus." Whereas South Carolina has been the first state in the United States to rule that the internet giant Amazon will have to make up the sales taxes that it has not collected. This essentially gives other states the license to punish other online e-commerce sellers to secure uncollected back-taxes. Learn what you can do today!

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