Forty-five states, including New Jersey, require merchants to collect and remit taxes on sales to residents of the state. That goes for online businesses, too, and that can make things complicated.
In 2018, the U.S. Supreme Court handed down South Dakota v. Wayfair. Inc. decision, which abolished the “physical presence” requirement for a state to require sales tax collection. Now, a company may be required to collect and remit sales or use taxes in a state even if the company has no facilities there. The new requirement is having an “economic nexus” with the state. As attorney Tom James writes in Allbusiness.com, that term is rather abstract.
“Unfortunately, it is not yet clear what exactly this means,” James says. “Some believe it means a high volume of sales or a large amount of revenue from sales in a state; others say it has only to do with a merchant’s intention to sell to a resident of a different state. Congress has the constitutional authority to settle the question, but so far it has not done so. Until it does, it is up to individual business owners to figure out how to comply with the sales and use tax requirements of the states in which the business has customers.”
He recommends e-commerce businesses that have customers in other states develop a sales tax compliance plan that answers some key questions.
