How South Dakota vs Wayfair Affects Taxes for OOH
We came across a KPMG report regarding the tax implications for Out of Home in the South Dakota vs Wayfair recent ruling.
The KPMG report gives an opinion about South Dakota vs Wayfair and how it may affect taxes for OOH related businesses. It is industry news which should be generating conversations which many are now having with their respective clients of an impending change.
Below is the KPMG report.
South Dakota v Wayfair: Why It Matters to Your Business
Historically, companies only needed to collect and remit sales and use taxes in states in which they had a physical presence. For example, if a company had an office in a state, independent contractors or had employees regularly visit a state or work from a state, then the company may have had a sales/use tax collection responsibility.
The U.S. Supreme Court, via the South Dakota v. Wayfair ruling, recently overruled its long-standing position that a physical presence is necessary for a state to require an out-of-state seller to collect sales or use taxes on sales made to customers in the state. Many believe the decision was meant to even the playing field between traditional brick and mortar companies–those already subject to the physical presence sales tax requirements–and e-commerce companies selling into certain states, but not required to collect sales tax with no physical presence in a state.
What did the Supreme Court decide?
The Wayfair decision overruled the physical presence requirements. Now, regardless of physical presence in a state, the mere selling of products or taxable services into a state may subject companies to a sales/use tax collection obligation. The Supreme Court indicated that the South Dakota statute, which imposes a collection responsibility if the seller has $100,000 or more sales or 200 separate transactions in the state, satisfied the “substantial nexus” requirement of the Commerce Clause. As such, many other states have immediately adopted or are planning to adopt standards similar to South Dakota’s provisions.
Why is this important?
Now that taxpayers may not rely on the physical presence standard in regard to sales and use tax requirements, many companies may be subject to tax in states where they have not historically filed. Simply put, your company may now be responsible for collecting and remitting sales and use taxes in states where you are not registered.
Although sales and use taxes are often associated with sales of tangible personal property, a number of states impose tax on sales of digital assets and services as well. Billboard and Transit (out of home advertising) materials are considered tangible personal property subject to sales tax in most states. As such, if companies producing billboard materials exceed the sales/transaction limits set by each state, they will likely need to be registered and start collecting and remit sales tax in each state. If you are considered a reseller, you will likely need to secure each state’s exemption certificates in order to avoid sales tax, similar to past practices.
In summary, the sales/use tax state requirement landscape is changing rapidly following the Wayfair ruling. Some laws have already become effective—companies will need to move quickly to determine when and how they will achieve compliance with economic nexus standards.
If you have any questions, please contact Stephen Metz, KPMG LLP, smetz@KPMG.com, (303) 382-7177.
This article represents the views of the authors only, and does not necessarily represent the views or professional advice of KPMG LLP.
The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.
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