The US Supreme Court's landmark 2018 South Dakota v. Wayfair decision has increased state sales tax revenues as well administrative compliance costs for multi-state businesses according to a recent report from the US Government Accountability Office (GAO). The GAO presented its findings to the US Senate Finance Committee on 14 June 2022.
According to the GAO report, state revenue collections from remote sales increased steadily from USD 3.2 billion in 2018 to USD 23.1 billion in 2021 following the Wayfair decision. Collections from marketplace sales similarly increased from USD 344 million in 2018 to USD 9.5 billion (41% of total collections were from remote sales reported that period) in 2021.
The GAO also reported that during the same period, businesses incurred increased costs associated with multi-state sales tax collection compliance, such as:
- software-related costs for expanded multi-state collection;
- audit and assessment costs due to increased exposure to more tax jurisdictions; and
- research and liability costs to stay current.
During the 14 June 2022 Senate Finance Committee hearing, Committee Chairman Ron Wyden (D-OR) called on his fellow lawmakers to provide small businesses relief as long as the Wayfair decision stands, in response to the GAO's findings. Chairman Wyden asked for "clear, standardized rules that lay out what states can require of small businesses outside their borders." Committee Ranking Member Mike Crapo (R-ID) also advocated for "a more efficient and less burdensome approach" to sales tax collection for the benefit of small businesses.
Note: As of June 2021, all 45 states with a state-wide sales tax and the District of Columbia have adopted requirements governing sales tax collection by remote sellers based on an economic presence (e.g. a certain amount of sales into the state), as opposed to a physical presence standard. All except one state also adopted requirements shifting primary tax collection obligations from remote sellers to marketplace facilitators (e.g. Amazon, eBay, and Etsy).