The rise of mobile technology and advances in digital capabilities has created a thriving e-commerce marketplace. This has made it possible for companies of every size to build relationships with buyers nationwide. Historically, state sales tax laws only impacted businesses with a physical presence in that state. However, a new decision by the US Supreme Court is expected to prompt changes in Nebraska sales tax laws that will affect any organization selling to Nebraska residents.  

The Court Decisions That Shaped Tax Regulations

Until recently, the standard for state sales tax collection was shaped by the precedent-setting 1992 US Supreme Court decision in  Quill v. North Dakota. In brief, the decision prevented states from collecting sales tax on purchases made through e-commerce, unless the company selling the products had a physical presence in the state. The logic for this decision was based on the Dormant Commerce Clause, which interprets the US Constitution as prohibiting any interference in interstate commerce by individual states unless expressly authorized by Congress. Of course, at the time of this decision, e-commerce was in its infancy. For perspective, the first commercial sales website launched that year, and Amazon didn’t come along until 1995. E-commerce has grown exponentially since 1992. In 2017, more than 10 percent of US retail sales were made online, and that figure is expected to grow by 15 percent each year. For decades, traditional brick-and-mortar businesses have complained that out-of-state e-commerce companies had an unfair competitive advantage, and states protested the loss of tax revenue from these transactions. The 2018 US Supreme Court decision in  South Dakota v. Wayfair overturned the  Quill v. North Dakota decision, and e-commerce companies are scrambling to adjust. The new ruling permits states to charge sales tax, regardless of a company’s physical presence in that state.  

The Impact for Companies Doing Business in Nebraska

• What do I sell?
• How much do I sell to a state?
• Who are my customers?
• Risk vs Reward