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.
The 2018 South Dakota v. Wayfair ruling established that online sellers with “legal nexus” must collect and remit sales tax in South Dakota–depending either on their sales volume or how many transactions they had. Now, a physical presence is no longer required for a state to impose sales and use tax on remote sellers, a decision that impacts nexus and tax compliance for any organization operating across state borders. Consequently, the Wayfair case has created opportunities for accountants to sell new advisory services that are focused on sales tax nexus.
How Did the Wayfair Case Effect Advisory?
Now that all U.S. states are free to expand their definition of nexus beyond physical presence, it can be challenging for many small businesses to stay up-to-date with tax rate changes and all the necessary reporting required by each state, not to mention staying on top of actual yearly payments.
This has opened up a whole new arena of advisory services that CPAs and accounting firms can offer to their clients. E-commerce businesses, in particular, may now need extra guidance to navigate the new laws surrounding sales tax based on economic nexus.
What Does This Mean For My Business?
Firms in every state now have the opportunity to help their clients ensure sales and use tax compliance by offering SUT advisory services. All businesses need to ensure that their sales, transactions, and remittance are in alignment with each jurisdiction’s tax laws. For those who don’t come into compliance, the sales tax liability that belongs to their customers could become their liability down the road.
Why SUT Advisory Services Are Important
It can be challenging for small businesses to stay up-to-date with tax rate changes and all the necessary reporting required by each jurisdiction. Many businesses put a lot of focus on income taxes and end up neglecting the sales tax arena. Not offering SUT advisory could be doing clients a disservice and cost them money in the long-run.
What Are My Next Steps?
The Wayfair case created unparalleled opportunities to offer SUT advisory to your clients, and LumaTax makes it easier than ever to build a service line dedicated to this area. We’ve developed an economic nexus analysis tool that completely automates an analysis of transactions to determine whether nexus has been established in each taxing jurisdiction. Our industry-first client exposure survey generates a LumaTax Compliance Score for each business to help quickly identify the clients most in need of 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.
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.
