Shoppers may have experienced a surprising addition to their final bill on Cyber Monday: a sales tax. Due to the Supreme Court’s recent decision in South Dakota v. Wayfair, states can now require a sales tax on online transactions by buyers within their state. If the state applies a sales tax in a reasonable manner, the tax would likely withstand a legal challenge.
The exact requirements are not yet known, but it is likely a state that applies a tax in the same manner as South Dakota would survive a legal challenge. South Dakota’s approach required a tax on retailers that exceeded a set threshold in sales or number of transactions within the state.
Have other states passed similar laws? Yes, as of this post twenty-three states have an active remote sales tax law. These states are, from West to East: Hawaii, Washington, Nevada, North Dakota, South Dakota, Oklahoma, Minnesota, Wisconsin, Illinois, Kentucky, Mississippi, Alabama, Michigan, Indiana, Ohio, Maryland, North Carolina, South Carolina, Vermont, Pennsylvania, New Jersey, Massachusetts and Rhode Island.
Noticeably absent: California.
Why is California absent? In short, because California has a very complex tax system. Many local municipalities within the state apply an additional sales tax. As a result, the sales tax in California can vary from 7.25 percent to 10.25 percent depending on where the item is purchased.
This lack of consistency along with the state’s massive size provide two key reasons the state has yet to pass a law to collect sales tax from retailers located outside of California.
However, it is important to note that the sales tax can still impact California businesses if conducting business in any of the states listed above that currently tax act of state retailers. As such, it is wise for these businesses to review their compliance with the sales tax laws not only within the state they have offices but where their customers are located.