Sales tax compliance post-Wayfair

Sales tax has turned into the Wild West not just for internet retailers, but also for brick-and-mortar stores, manufacturers, and wholesalers alike. With over 10,000 sales tax jurisdictions in the United States, almost any company selling across state lines needs to be analyzing its sales tax compliance. The question is: What are you and your clients doing about collecting sales tax for sales across state lines?


In the 1980s and 1990s, states attempted to get companies to collect sales tax on transactions into the state. These companies were predominantly located out of state and were making sales via mail or telephone calls. The companies were not collecting sales tax on the transactions. The states were less than pleased. One state, North Dakota, passed a law requiring any company engaging in “regular or systematic” solicitation in the state to become registered for and collect sales tax. In 1992, the U.S. Supreme Court held a company needed to have a physical presence (employees, property, or offices) in a state before the state could require the company to collect sales tax. This landmark case was Quill Corp. v. North Dakota,504 U.S. 298 (1992).

Quill made sales tax compliance easy for companies: If a company was physically present in a state, it had to collect sales tax for that state. If the company was not physically present in a state, it did not have to collect sales tax, although it was inevitable that there would be some controversy about when companies were “present.”

The states were unhappy with this line of demarcation but saw no immediate way around it. That is until the internet arrived. Sales slowly began shifting from in-person, in-store (with mail-order catalog sales a lesser factor) to online. States began to see a dip in sales-and-use tax revenues because many internet sellers, such as Amazon, were physically located outside of most states and only made sales into these states. Since these internet sellers were not physically present in that state, they did not have to collect sales tax on sales into the state. Consumers noticed that sales tax was not due on these internet purchases, and most consumers failed to realize they were required to pay use tax on their internet purchases to their state of residence. And, of course, brick-and-mortar stores began to suffer as they lost sales to online retailers.

Seeing revenues were on the decline, states began … Continue Reading Full Story >>>

About the author

David J. Brennan Jr., Esq., LL.M. (Tax), is an attorney in Florida at Moffa, Sutton, and Donnini PA, which has a primary focus on sales-and-use-tax controversy. He was a senior attorney at the Florida Department of Revenue from 2014 to 2016 and focuses his practice primarily on multistate sales-and-use-tax issues. He would like to thank James Sutton for his contributions to the article.

To comment on this article or to suggest an idea for another article, contact Sally P. Schreiber, a JofA senior editor, at or 919-402-4828.

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