South Dakota vs. Wayfair- What you need to know


April 29, 2018

Visit https://www.auctiontax.com for more information.

You may or may not be aware that there is an industry-changing court case that was heard by the U.S. Supreme Court in April that could affect auctioneers and other business owners across the United States- “South Dakota vs. Wayfair.”

South Dakota recently passed a law for taxes to be collected across state lines for online sales and the like. The legislation calls for taxes not only to be collected, but at the tax rate of the buyers’ location, not the tax rate of the sellers’ location. It has been challenged and was heard by the Supreme Court in April. The Supreme Court is expected to rule on the case in June. There are 35+ states waiting to see the outcome of this court case to enact their own state law following suit. 99% of those states want to retroact the law THREE YEARS! As a result, sellers would be responsible for going back through records, contacting any out-of-state buyers, finding out the tax rate of their locations, collecting tax for three years of sales and remitting those taxes to their respective jurisdictions. PLUS, to do so, you may be required to hold a sales tax license in each state in which buyers purchase items from you, and in most cases a corresponding business license. By doing so, you will be subject to that jurisdictions regulations and police powers. Any non-collections would still be the fiscal responsibility of the seller. As of March 2014, there are 9,998 tax jurisdictions in the United States.

This not only affects the auction industry, but any business that sells out-of-state, particularly online, even through Craigslist sales or Facebook advertising; and “Mom-and-Pop” shops. Software exists to help carry out these tasks, but it is very costly. The costs to carry out this law’s requirements will cripple so many businesses as it worded.

The National Auctioneers Association has filed a brief in the case against South Dakota on behalf of auction industry professionals, supported by the Mississippi Auctioneers Association and more than 25 other state auctioneer associations. The NAA is arguing that we are not opposed to collecting due taxes; but, more reasonably, we would like to see taxes collected as a “point-of-sale” tax (as the current law provides). For example, if an item is sold by a company in Mississippi, Mississippi sales tax is collected. In most cases, the auctioneer is licensed by state and/or local government to conduct the auction, and in all cases governed by local laws. South Dakota’s argument that the nexus of the transaction is the location of the buyer would create an undue burden on the auction industry to be licensed and regulated by multiple jurisdictions and taxing authorities.

We fear that the fact that so many states are hungry for any kind of tax revenue that they will jump at this legislation if upheld in the Supreme Court. But the burden placed on so many small companies will be unbearable.

In addition to following this case at the Supreme Court level, we are voicing our concerns and our opposition to the legislation as written by South Dakota and any future plans for Mississippi to follow suit to our Mississippi state legislatures. 

For more information on this issue, please visit www.Auctiontax.com. Please take this issue very seriously for the sake of our industry and so many other companies around the country in danger of this heavy burden.

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