By Alandis Brassel
Earlier this summer, the Supreme Court caused a stir among small businesses with online stores with its South Dakota v. Wayfair decision. In Wayfair, the Court ruled that South Dakota could require online retailers without an in-state physical presence to collect sales tax for sales made in the state. Before this decision, online retailers were required to collect sales tax only if they had a physical presence in the state, such as an office or a warehouse.
What does Wayfair mean for artists who sell work and art collectors who purchase it online? At the end of the day, artists shouldn’t worry too much, at least not immediately. Here’s why:
- Online sales tax collection laws have to be passed by states individually.
Wayfair doesn’t mandate all online retailers to collect sales tax—it simply mandates an online retailer who makes a sale to someone in South Dakota to comply with South Dakota’s sales tax law.
Significantly, the decision opens the doors for other states to pass similar laws. Before a retailer can be required to collect sales tax in a particular state, the state actually has to pass a sales tax law. While many states have proposed laws, it will take time for them to be enacted.
- You might fall under an exception.
If other states follow South Dakota’s lead, low-volume businesses might get a pass. South Dakota requires online retailers to collect the sales tax only if they either have more than $100,000 in annual sales in the state or process more than 200 transactions in the state. This exception was one of the reasons the Court found the law acceptable. It wouldn’t be surprising to see similar exceptions in other states’ laws.
The bottom line is that while you should be aware of changes in sales tax laws, even to the extent that artists should review their online sales tax collection policies, you shouldn’t be deterred from making art transactions online. Make great art and keep good records.
Alandis Brassel is a volunteer attorney with the Arts & Business Council of Greater Nashville. You can find out more on this topic, and other legal issues for artists, by visiting the Arts & Business Council online at www.abcnashville.org.