In a highly anticipated decision, the U.S. Supreme Court ruled yesterday that states may require online sellers to collect and remit sales tax regardless of where the seller is based. While the immediate case, South Dakota v. Wayfair, only validates a rule passed by South Dakota in 2017, it will certainly have a major impact on all of eCommerce moving forward.
This case has major implications for eCommerce, and there is a lot to unpack in the Court’s opinion. For a fuller review of the impacts of Wayfair, we will be posting more information on the main Sovos feed, which you can access here. But many wineries selling direct-to-consumer (DtC) are concerned with how this could impact them, which we want to quickly address here.
How will Wayfair affect wineries?
In the immediate future, Wayfair will not have an adverse effect on DtC wineries. The Court’s decision only relates to the specific South Dakota law, which states that any seller making more than $100,000 in revenue or more than 200 separate transactions in a year must begin collecting and remitting sales tax on their sales to South Dakota.
However, DtC wineries are already required to collect and remit sales tax on their DtC sales to the state as a condition of getting their DtC license in the state. Essentially, these wineries were ahead of the game when it came to remote sales tax collections; going forward, other online sellers will need to do what DtC wineries have been doing since the state opened to DtC sales in 2016.
We can expect that many other states will soon follow South Dakota and enact their own economic nexus tax laws (as opposed to the “physical presence” nexus rules, which the Court deemed invalid). But here again, DtC wineries are already required to collect sales tax in most states where they can make DtC sales into.
There are a few states where the Wayfair decision could have an impact, however. States such as Colorado, Minnesota, Florida, and Missouri currently do not require DtC wineries to collect sales tax on their DtC orders, and so wineries would be in the same boat as other eCommerce sellers in these states. None of these states has as of yet passed a law similar to South Dakota, but once they do (and again, we have every reason to expect that to happen), then wineries would be impacted just like everyone else.
The Wayfair decision is still very fresh, and its full impact won’t be revealed for many months. Even when other states pass their own economic nexus rules, we can expect further litigation to hammer out what are the appropriate thresholds. Plus, there is always the possibility that Congress could act and again introduce its own standards.
As we learn more about the aftermath of Wayfair and how it is impacting the DtC wine market, we will make sure to keep you informed. We encourage you to subscribe to this blog for future posts and look at our sister blogs from Sovos, which will provide more background and details.