New Challenges Impacting the 2019 Tax Season
Big developments on the tax landscape over the last 14 months will definitely be felt this tax season. Below we offer a quick review of the two most impactful events: the passage of the landmark Tax Cuts and Jobs Act and the Supreme Court ruling on South Dakota v. Wayfair.
Tax Cuts and Jobs Act (TCJA)
The TCJA is the biggest tax code overhaul in recent history. At over 500 pages in length, the legislation contains myriad new, updated, and eliminated provisions. Though many uncertainties existed initially, the regular release of additional guidance has offered important clarification. For an in-depth analysis of the TCJA and the provisions included therein, check out this article from the Tax Foundation.
South Dakota v. Wayfair Ruling
In June of 2018, the U.S. Supreme Court ruled that states can impose sales tax on internet retailers, even if the retailer has no physical presence in that state. So what does this mean for online retailers? As a result of the Wayfair decision, any company that exceeds the sales threshold in a state—regardless of physical presence—now has nexus. Therefore, the company owes sales tax and must file state returns.
Entities involved in e-commerce will need to take the following steps: (1) re-determine where they have nexus, (2) begin to collect sales tax information in those states, and (3) file the subsequent state returns.
As a result of the Wayfair decision, many states have begun moving to update existing or enact new e-commerce tax laws. Congress, too, is expected to address the issue. New legislation will likely include provisions to simplify, at least for online retailers, the complex state and local tax landscape.