Economic nexus is a buzzword these days – and for good reason. A recent Supreme Court decision has changed the way many states determine their requirements for charging state sales tax, prompting widespread effects for many online sellers. In fact, these laws could add new sales tax obligations for you, and have lasting effects on your business.
Previously, only businesses possessing a “sufficient physical presence” in a state were required to charge and remit state sales tax. This presence, or sales tax nexus, could be as simple as a storefront or set of employees within a state. The rise in online sales, however, resulted in a vast number of businesses that maintain a mostly online presence, prompting several states to rethink the way nexus is defined.
South Dakota v. Wayfair (2018) resulted in the Supreme Court overturning a previous ruling that had defined nexus in physical terms only. Now, any business meeting a certain set of revenue or sales thresholds has also established an economic nexus and is required to charge and remit state sales taxes according to the laws of each state. As a result, North Dakota online sales tax rules have changed, along with those in many other states.
Which States Have New or Updated Laws
The Supreme Court’s decision led many states to begin enforcing laws that had been passed prior to 2018. Several others quickly passed their own laws in the months following the Wayfair case, while still others await further court decisions. In total, 31 states have recently passed or begun enforcing laws regarding economic nexus, including North Dakota.
You can find Avalara’s comprehensive list of states with economic nexus laws and their respective thresholds here.
eCommerce Sales Tax Rules in North Dakota
North Dakota’s laws regarding economic nexus for state sales tax purposes became effective on October 1, 2018. The new law states that, in order for a business to collect sales tax online in North Dakota, it must cross one of these thresholds:
- Revenue of more than $100,000
- Two hundred or more separate transactions
North Dakota laws specify that these thresholds are independent of each other. Specifically, if an online seller produces $100,000 in revenue, regardless of how many transactions were performed, it must collect and remit state sales tax. Similarly, reaching 200 separate transactions also requires the assessment of state taxes regardless of revenue.
Do I Need to Charge Sales Tax on My Website?
If your business sells a tangible product or provides certain services in the state of North Dakota and meets or exceeds one of the two thresholds mentioned above, you must charge and remit state sales tax. Other states have not yet begun enforcing their new laws or may have different thresholds, so thorough research regarding each new law is crucial. Avalara’s host of tax services is a great resource that can help you determine which laws are applicable to your business.
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.