Brick-and-mortar retail giant Target has publicly applauded the Supreme Court of the United States’ (SCOTUS) decision to allow states to apply a sales tax to online retail purchases. The lack of the state sales tax has hurt business for these corporations and led to lost revenue for states.
What was the ruling? The case, Quill Corp. v. North Dakota, questioned a previous SCOTUS decision from 1992. In that previous case, SCOTUS essentially stated a business had to have a physical presence within a state for a state to charge a sales tax. At the time, online transactions were minimal. This is no longer the case.
As such, South Dakota decided to move forward with a challenge to the decision by taxing Quill Corp. Quill did not have a sufficient physical presence within South Dakota to justify the tax. Ultimately, SCOTUS agreed with South Dakota and now allows states to require online sellers to pay a tax.
There are some rules. For example, in order to apply a tax, the state must establish the retailer conducts at least $100,000 in online sales and has more than 200 transactions annually.
What does this mean for Minnesota businesses? Depending on the details of the business strategy, it could mean additional tax obligations.
The Minnesota Department of Revenue has stated that it will provide further guidance within the next month. However, the change could lead to an increase in audit rates as businesses attempt to navigate the impact of the ruling. Businesses that believe they may be impacted by the ruling are wise to seek legal counsel. An experienced attorney can review your situation and help reduce the risk of an audit.