M&A Nugget: Sales Tax – Maryland Joins the Wayfair Bandwagon
A recent M&A nugget reported how an ordinary component of the purchaser’s due diligence study, taxes, became more important with the Supreme Court’s decision in South Dakota v. Wayfair, in which the Supreme Court overruled its prior cases and held that South Dakota can require out of state online retailers to collect South Dakota sales tax, even if they do not have a physical presence in the State. The South Dakota statute approved by the Court covers only retailers who annually deliver more than $100,000 of goods or services into, or engage in 200 or more transactions in, South Dakota. The Wayfair case is a major change in the sales tax arena. Since the case, other states have enacted rules similar to the South Dakota statute, including Maryland, which adopted emergency regulations effective October 1 that require online retailers to report and collect sales tax on transactions after October 1 if either the $100,000 or 200 transactions test is met. A seller’s tax liabilities can pass through to the purchaser. So, depending on the State in which the transaction occurs, a more thorough sales tax analysis, taking into account the seller’s online sales, must be conducted.
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Glenn D. Solomon is a principal at Offit Kurman and has provided counsel to businesses and business owners for more than twenty-five years. He has extensive experience in the purchase and sale of businesses, structuring ownership agreements, and advising companies in financial distress.
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