Key takeaways
- Wayfair changed the game: The 2018 ruling removed the physical presence requirement, making remote sellers liable for sales tax based on economic nexus.
- New advisory opportunities: CPAs can now offer sales and use tax (SUT) advisory services to help clients manage multi-state compliance and avoid penalties.
- Technology streamlines compliance: Tools like LumaTax automate nexus analysis and exposure assessments, making it easier for firms to identify clients who need SUT guidance.
In short: The 2018 South Dakota v. Wayfair ruling means states can make remote sellers collect sales tax without a physical presence. Sales tax nexus can now depend on sales volume or transaction count. This creates new sales and use tax (SUT) advisory opportunities for CPAs and accounting firms.
The 2018 South Dakota v. Wayfair ruling found that online sellers with “legal nexus” must collect and remit sales tax in South Dakota. Nexus depends on either their sales volume or their number of transactions.
A state no longer needs a seller to have a physical presence before imposing sales and use tax on it. This affects nexus and tax compliance for any organization operating across state borders. As a result, the Wayfair case has created chances for accountants to sell new advisory services focused on sales tax nexus.
What thresholds did the Wayfair case approve?
The Supreme Court decided South Dakota v. Wayfair on June 21, 2018, by five votes to four. It overruled the physical presence rule of Quill Corp. v. North Dakota and National Bellas Hess.
The South Dakota law covered sellers that delivered more than $100,000 of goods or services into the state each year, or made 200 or more separate transactions there. Other states then set their own economic nexus thresholds, so the tests differ from state to state.
Some states have since simplified their rules. South Dakota dropped its 200-transaction test from July 1, 2023, and Illinois did the same from January 1, 2026. Both now rely on a $100,000 sales test.
Do all states use the $100,000 threshold?
No. Each state sets its own test, and some large states use a higher figure:
- California: $500,000 of sales of tangible goods delivered into the state, in the current or previous calendar year. There is no transaction test.
- Texas: $500,000 of total Texas revenue in the preceding twelve calendar months. A remote seller at or above it must get a permit and start collecting by the first day of the fourth month after crossing it.
How Did the Wayfair Case Affect Advisory?
The Wayfair case opened a whole new area of advisory services for CPAs and accounting firms. All U.S. states are now free to define nexus beyond physical presence. Many small businesses find it hard to keep up with each state's tax rate changes and reporting rules. They also need to stay on top of the actual yearly payments. Learn more about Taxually for accounting firms.
E-commerce businesses, in particular, may now need extra guidance with the new laws on sales tax based on economic nexus.
What Does This Mean For My Business?
Firms in every state can now help clients stay compliant with sales and use tax by offering SUT advisory services. All businesses need to make sure their sales, transactions and remittance match each jurisdiction’s tax laws. If they don't comply, the sales tax liability that belongs to their customers could become their own liability later.
Why Are SUT Advisory Services Important?
SUT advisory services matter because small businesses struggle to keep up with tax rate changes and each jurisdiction's reporting rules. Many businesses focus heavily on income taxes and neglect sales tax. Not offering SUT advisory could do clients a disservice and cost them money in the long run.
What do SUT advisory services include?
A typical sales and use tax advisory service covers:
- Nexus studies: Checking where a client has physical or economic nexus, and from when.
- Exposure reviews: Estimating unpaid tax, interest and penalties for past periods.
- Voluntary disclosure: Using voluntary disclosure agreements to settle past liabilities on better terms.
- Registration and filing: Registering in new states and filing returns on time.
- Taxability reviews: Checking which products and services are taxable in each state.
What Are My Next Steps?
The Wayfair case created unparalleled opportunities to offer SUT advisory to your clients. LumaTax makes it easier than ever to build a service line dedicated to this area. We’ve developed an economic nexus analysis tool that fully automates the analysis of transactions. It works out whether nexus has been established in each taxing jurisdiction.
Our industry-first client exposure survey generates a LumaTax Compliance Score for each business. This helps you quickly spot the clients who most need SUT advisory services.
We see it as our duty to navigate the ever-changing landscape of sales tax regulations, and would welcome the opportunity to connect with you to see how we could lighten your clients’ compliance burden.
How Taxually handles this
Taxually’s LumaTax runs a nexus analysis on your sales, helps you register in the states where you must collect, and prepares and files multi-state sales tax returns, including Canadian GST/HST. LumaTax is currently available to enterprises and accounting firms. For the full workflow, read how to automate US sales tax filing in every state.
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Frequently asked questions
What was the South Dakota v. Wayfair ruling?
The 2018 Supreme Court ruling allowed states to require remote sellers to collect and remit sales tax based on economic nexus—not just physical presence.
How did Wayfair change sales tax compliance?
Businesses that sell across state lines must now monitor sales volume and transaction thresholds in each state to determine if they owe sales tax there.
Why does this matter for accountants and advisors?
The ruling created a growing need for sales and use tax (SUT) advisory services, giving firms new opportunities to help clients stay compliant and avoid penalties.
What challenges do small businesses face post-Wayfair?
Many struggle to track evolving state laws, tax rates, and filing requirements—especially if they sell online or across multiple states.
What economic nexus thresholds did Wayfair approve?
The South Dakota law upheld in Wayfair applied to sellers with more than $100,000 in sales or 200 or more separate transactions into the state each year. South Dakota has since dropped the transaction test.
What is the economic nexus threshold in California?
California requires remote sellers to collect tax once their sales of tangible goods delivered into the state exceed $500,000 in the current or previous calendar year.
When must a remote seller start collecting tax in Texas?
A remote seller whose Texas revenue reaches $500,000 in the preceding twelve months must get a permit. It must start collecting by the first day of the fourth month after crossing the threshold.
