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“Economic Nexus Thresholds Set After Wayfair May Be Dropping"

December 9, 2020

Article by Jennifer Karpchuk on "Economic Nexus Thresholds Set After Wayfair May Be Dropping"


In an article published on December 9, 2020 in CPA Now, Chamberlain Hrdlicka Shareholder Jennifer Karpchuk discusses the impact the decision in Wayfair has had, almost two years since it was determined by the U.S. Supreme Court, in light of COVID-19 and the increased reliance on e-commerce due to quarantines and work-from-home environments.

“In Wayfair, the U.S. Supreme Court struck down the requirement that a taxpayer have a physical presence in a taxing state to be subject to its sales tax collection requirements,” explains Karpchuk. “Mere economic presence was sufficient under the facts of the case. Post-Wayfair, states moved rapidly to implement economic nexus laws – the majority of which mirrored those imposed in South Dakota ($100,000 or 200 transactions in a state annually).”

Karpchuk further explains that COVID-19 and the accompanying quarantine and work-from-home requirements accelerated an already booming e-commerce sector of the economy. Which has allowed many states to capitalize on the increases in e-commerce, thereby softening some of the fiscal impact of COVID-19. The pandemic also began to impact the Wayfair sales thresholds, which has led state leaders to reconsider lowering their thresholds to make up for revenue shortfalls.

“In an additional effort to fill budget gaps, Wayfair laws may start to bleed into the realm of income and gross receipts taxes,” said Karpchuk. “Prior to Wayfair, there was debate over whether the physical-presence standard applied equally to sales taxes as to income and gross receipts taxes.”

Karpchuk concludes that “with the fiscal impact wrought by COVID-19, taxpayers can expect responses on the state and local tax front over the coming months and years.”

To view the full article, click here.