Wisconsin to enforce Wayfair-style economic nexus rule starting October 2018

Wisconsin will require remote sellers to collect and remit sales or use tax on taxable sales into Wisconsin starting October 1, 2018.

This new tax policy is the result of the Supreme Court of the United States’ decision in South Dakota v. Wayfair, Inc. (Wayfair). On June 21, 2018, the court overruled the long-standing physical presence rule it upheld in 1992 in Quill Corp. v. North Dakota (Quill), calling it “unsound and incorrect.” It granted South Dakota the authority to impose a tax-collection obligation on out-of-state sellers based on their “economic and virtual” contacts with the state.

Under South Dakota’s economic nexus law (SB 106), remote retailers must register, collect, and remit tax in the state once they meet one of the following thresholds in the current or previous calendar year:

• Gross revenue from sales of tangible personal property, electronically delivered products, or services delivered in the state in excess of $100,000; or
• 200 or more separate transactions of the same

Wisconsin plans to impose the same thresholds in a soon-to-be-created rule. According to the Wisconsin Department of Revenue, “the rule will be consistent with the Court’s decision in Wayfair, which approved a small seller exception for sellers who do not have annual sales of products and services into the state of (1) more than $100,000, or (2) 200 or more separate transactions.”

Sellers with a physical location in Wisconsin are required to collect even if they meet the small-seller exception. Additional details are available from the Wisconsin Department of Revenue.

Expect more states to follow Wisconsin’s lead

The repeal of the physical presence rule is a game changer: Close to 20 states have already adopted economic nexus laws or rules that could be impacted by the Wayfair ruling.

Wisconsin found a speedy way around the often lengthy legislative process by announcing the enforcement of a rule it has yet to create. Whether they take that route or another, more states are likely to follow suit; indeed, an economic nexus measure is already sitting on the New Jersey governor’s desk, waiting for his signature.

Learn more about South Dakota v. Wayfair, Inc. and its impact on your business here.