Until recently, state sales tax rules for online sales were based on Supreme Court case – Quill Corp. v. North Dakota (1992) – requiring businesses with a physical tie, or nexus, to the state to collect and remit state sales tax. This nexus was also referred to as “sufficient physical presence” and specified that businesses with employees, a warehouse, or a storefront in the state were subject to sales tax.
With the rise in online retail since the ruling, many states wanted taxes to apply to online sales as well, and took the initiative to pass laws to that end. Over the years, a few states enacted these laws, but not many enforced them. It wasn’t until the Supreme Court overturned Quill v. North Dakota that widespread changes began to occur.
South Dakota v. Wayfair, Inc. (2018) redefined nexus in economic terms for state tax purposes. Essentially, businesses selling products in a particular state had established an economic tie to the state, and may be required to charge and remit state taxes if they meet certain revenue or sales thresholds. The ruling has the potential to affect online retailers doing business in states that have passed such laws.
How Were Indiana Online Sales Tax Rules Affected?
Some states established economic nexus laws prior to the Wayfair case, only choosing to enforce them after it took effect. Others have passed laws since then, with more states to follow in 2019. With such a wide range of laws and an even wider ranges of effective dates, it is essential that online sellers ensure they know the laws for each state in which they do business.
eCommerce sales tax rules in Indiana became effective as of October 1, 2018. As a result, many online sellers have found themselves asking “Do I need to charge sales tax on my website?” Current Indiana law states that businesses must charge and remit state sales tax if they meet either of the following thresholds:
- A total revenue of more than $100,000
- Separate sales transactions numbering over 200
It’s important to note that either one of these two thresholds will result in an online business being required to collect state taxes. Even if that business makes fewer than 200 sales transactions but has a revenue of over $100,000, it must collect and remit Indiana state sales tax. Similarly, performing more than 200 transactions results in an economic nexus even if total revenue in Indiana is under $100,000.
What Could Change for Your Business
If you are an online seller that sells tangible products in the state and meets either of the above thresholds, you must collect sales tax online and register to do so in Indiana alone or with streamlined system according to the new eCommerce sales tax rules in Indiana. It is important to note that requirements can vary drastically by state, and it is your responsibility to charge tax in each state that requires it by law. Avalara offers services geared towards determining your total state tax responsibility, and the know-how to make it effortless.
Disclaimer: The information in this blog post is provided for general informational purposes only and should not be construed as legal advice from Forix or Avalara.