Cyber Monday is a day to get great deals on online transactions. Although the deals are still good, the overall savings may not be as high as expected for residents in Minnesota. Minnesotans may notice a new addition to their bill: sales tax.
What has changed? In the past, states had to satisfy a difficult requirement in order to apply a sales tax to online transactions. This requirement was known as the “physical presence” requirement. The state would need to show the business had a physical presence, such as a brick-and-mortar store, within the state to require a sales tax. Without establishing this physical presence, the state generally could not expect the business to pay a sales tax.
That changed this past summer when the Supreme Court of the United States agreed to hear South Dakota v. Wayfair. In that case, the Supreme Court decided the physical presence requirement was no longer appropriate. Instead, businesses were now able to use technological innovations to find success in the online marketplace on a much larger scale. As a result, the Supreme Court decided new rules were required.
Ultimately, the Supreme Court found the elements South Dakota used to determine if a sales tax was appropriate for an online transaction were reasonable. This has led states throughout the country, including Minnesota and Wisconsin, to pass similar laws. As such, businesses that sell goods and services in these states and meet certain requirements will now need to collect a state sales tax from consumers.
