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U.S. Court Ruling Affects Global Online Retailers

By Susan Osborn  

Companies selling online to U.S. customers until recently often did not have to pay sales tax in states where they had no physical presence. That has changed.

A U.S. Supreme Court ruling, South Dakota v. Wayfair, allows the collection of state sales tax from companies with a “substantial nexus” in a state, even if they don’t have a physical presence.

Although the ruling only applies to South Dakota, other states are revamping their laws to leverage the “substantial nexus” definition in some fashion. Forty-five states currently charge sales tax.

The new decision—widely referred to as “kill Quill”—overturns 1992’s Quill v. North Dakota, which said collecting sales tax in a state was unconstitutional unless a business had a physical presence in-state. The Quill ruling had become increasingly controversial over the years as the “mail order” sales it was written to address—amounting to just $180 million at the time—have been replaced by the internet commerce juggernaut.

Online retailers took in more than $409 billion in sales last year, and sales are expected to reach the half-trillion mark by 2019. Brick-and-mortar retailers, who have long complained that electronic retailers have an unfair advantage by not having to charge sales tax, hailed the new ruling as a victory.

Read the full blog article here.

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Susan Osborn, Director of Advisory Services, has been with Radius’ advisory group since 2010. She specializes in international tax setup and structuring in the Americas. She began her career as a corporate tax accountant at Raytheon, and worked in PwC’s tax practice for more than 13 years. She is based in Boston.