The ecommerce industry is about to experience a major shift in the way they do business in the United States.
After about two months of deliberation, the Supreme Court has ruled on the most closely-watched case in the ecommerce industry. Internet retailers like Wayfair, Amazon, Newegg, and countless others can be required to collect sales taxes in states despite having no physical presence.
Thursday’s judgment overruled the decision of the 1992 case, Quill Corporation v. North Dakota, that restricted states from requiring sales taxes from businesses that do not have a substantial presence.
Does that mean it’s time to panic?
What does this mean for you in the ecommerce industry?
Don’t worry, the world is not ending. Although, the decision was immediately felt by the ecommerce industry with many retailers experiencing a loss in the stock market.
Online retailers previously benefited from not having to shoulder the burden of tax collection for individual states, and the savings trickled down to consumers who saw lower prices on the goods and services they purchased online.
This really helped bring the ecommerce industry to the powerhouse it is today.
Prior to the ruling, ecommerce businesses like Amazon voluntarily collected and remitted sales taxes on a state by state basis. Moving forward, ecommerce businesses are expected to take on the responsibility of collecting and remitting state taxes for each state that requires one—whether or not the business has a physical presence in the individual state. As of now, there is no immediate collection enforcement in place, but that doesn’t mean your business should wait to prepare for the coming changes.
The ruling also applies if your business is selling digital goods and services online.
The Wayfair ruling is primarily focused on online retailers specializing in physical goods. The full impact of the ruling has yet to be seen, however, it is expected that all online businesses will be affected to varying degrees.
If your businesses are selling digital goods and services you will most likely be required to adhere to the current ruling and follow the evolution of the regulation as the courts continue to decide on the definition of digital goods and services, and how to apply taxes on them. The responsibility of collecting and remitting state sales taxes will continue to be increasingly complex and challenging.
Is your business ready to manage these complex tax regulations?
Here’s what you can do to make sure your business is compliant with the ruling.
Your business will have to make changes to their internal teams and processes in order to be compliant with the new state tax regulation. The work involved as well as investment in resources can be daunting—especially for growing digital businesses.
What’s going to be easier? Hiring dozens of accountants to manage the thousands of state tax regulations across the US and around the world, or working with a trusted partner to manage taxes on your behalf?
For most people, the clear solution is an end-to-end solution that will manage every aspect of the ecommerce experience from the buy button and beyond.
That’s why FastSpring offers a full-service ecommerce platform that includes a back office product with complete tax management. Our back office solution handles:
- Tax collection
- Global compliance—This includes all U.S. state taxes and the European Union’s Value-Added Tax (VAT).
With FastSpring handling complex tax operations, businesses can focus on scaling their business and growing revenue.
Are you ready to let FastSpring manage your global tax compliance? Request a demo today.