Supreme Court overturns ‘physical presence’ standard in Wayfair decision

Applicability

South Dakota v. Wayfair, Inc. No. 17-494 (S.Ct. June 21, 2018)

• Companies doing virtual business in states with an ‘economic nexus’ law

Relevant dates

• Effective immediately.

Key impacts

• On June 21, 2018, the Supreme Court overturned its previous decision that a state cannot require a business to collect sales and use taxes from customers in states where the business has no physical presence
• The decision paves the way for states that have adopted an economic nexus law to begin requiring the collection of sales and use taxes if the law does not otherwise violate constitutional principles
• While the Court did not resolve all issues in its decision, it is clear that businesses that do not collect and remit sales and use taxes cannot continue to rely on not having a physical presence when doing business in states with economic nexus laws
• We believe that those companies will need to consider whether the Court’s decision means that they will need to recognize financial statement liabilities and provide additional disclosures

Report Contents

• Applicability
• Key facts and impacts
• Financial reporting implications – Obligating event has occurred
• Financial reporting implications – Contingency exists
• Financial reporting implications – Income taxes
• SEC reporting considerations
• SEC reporting considerations – Internal controls