Prior to the recent South Dakota v. Wayfair, Inc. (2018) decision, the requirements to charge and remit sales tax were physical in nature. In fact, the terms “state sales tax nexus” and “sufficient physical presence” were nearly interchangeable. In order to establish nexus, businesses needed to possess a tie to a state in the form of a storefront, warehouse, employee or other physical presence.
After online sales began to dominate the market, many states began to re-evaluate the definition of nexus. Some states passed laws establishing economic nexus – or, a sufficient economic presence within a state – as a trigger for state sales tax obligations. However, without federal intervention, most of these laws were not enforced.
The Supreme Court’s decision in the Wayfair case officially overturned the previous conclusion that nexus must be established physically and extended the definition of nexus to one that encompasses economic presence as well. As a result, online sellers became liable for collecting and remitting state sales tax for states in which they had crossed certain revenue and sales thresholds. Due to this decision, South Carolina online sales tax rules are among those that have experienced a variety of changes.
Which States Have Passed Economic Nexus Laws
As mentioned, many of the existing state laws were not enforced, though most of those states have adopted new effective dates to begin enforcing them. Additionally, several other states passed their own laws following the Wayfair decision, and more are awaiting court action. A total of 31 states, including South Carolina, have new or recently updated laws regarding economic nexus for online sellers.
For a comprehensive list of all states with changes to economic nexus, see Avalara’s detailed chart here.
eCommerce Sales Tax Rules in South Carolina
Laws regarding state sales tax economic nexus became effective in South Carolina as of November 1, 2018. Specifically, the law states that in order to collect sales tax online in South Carolina, a business must have a revenue of more than $100,000 in the preceding or current calendar year. It is worth noting that, unlike most other states with economic nexus laws, South Carolina does not specify a threshold for the number of transactions.
Sellers located physically out-of-state and crossing this threshold are referred to as remote sellers. Accordingly, they must register with the South Carolina Department of Revenue and obtain a South Carolina retail license. These registrations are accepted online as well as by mail.
Do I Need to Charge Sales Tax on My Website?
If your business sells a tangible product or delivers a service into the state of South Carolina and grosses over $100,000 in revenue, you must charge and remit state sales tax. Note that South Carolina’s laws do not necessarily reflect the laws of other states. To determine your total state tax responsibilities in light of the many new laws, a tax professional like Avalara is essential.
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.