The Supreme Court’s recent decision in “South Dakota vs. Wayfair” threw out the tenets of the decades-old “physical presence” requirement that governed state nexus.  If you have internet sales, take note.


Saltwater Christian College (SCC) is a private college exempt under Internal Revenue Code section 501(c)(3) and 170(b)(1)(A)(ii).  They are required to file Form 990 annually.

SCC has a profitable activity whereby their graphic design and marketing students collaborate on a “business venture” selling apparel and other items that sports SCC’s logo and mascot – the Saltwater Surfdogs.  The venture brings in gross income of over $1 million annually.

In a meeting with SCC’s CFO and Accounting Team, they bring up the recent “Wayfair” decision by the Supreme Court and ask us about whether they may have to register and pay sales taxes in various states in the future.  We answer that every jurisdiction is different, but certainly they need to be tracking sales for potential exposure to new state laws.  (This is not unlike the procedures that should be in place in the state charitable solicitations registration realm.)

Ultimately, the 1992 “Quill” decision made state nexus dependent upon “physical presence” in a given state.  This might have been evidenced by property in the state, employees in the state, etc.  The “Wayfair” decision discards the “physical presence” requirement and opens the gates for states to base “sales tax nexus” upon the volume of sales in their state.

As an overview, in the wake of “Wayfair,” approximately 16 states have new nexus rules coming on line in 2018, with two more in 2019.  It would behoove all higher education institutions to have conversations with their tax advisors about these changes.  Many contain thresholds for sales dollars and/or transactions.  Institutions should carefully review the various state laws for definitions and amounts.  Several states have no economic nexus policies.  Conversely, 16 states have $100,000 and 200 transaction thresholds, as exemplified by Indiana’s rules:

“Retail sales of tangible personal property, products delivered electronically or services that exceed $100,000, or are made in 200 or more separate transactions.”

At the lower end of the threshold spectrum are Oklahoma, Pennsylvania, and Washington who have a threshold of $10,000 or more of taxable sales in the state.


From South Dakota Codified Law section 10-64-2:

A remote seller has sales tax nexus with South Dakota if the seller, in the current or previous calendar year:

  • had gross revenue from sales of taxable goods and services delivered into the state exceeding $100,000; or
  • sold taxable goods and services for delivery into the state in 200 or more separate transactions

From a summary of South Dakota vs. Wayfair…:

The Court cited several features of South Dakota’s economic nexus law that weighed in favor of upholding it, including that:

  • The law provides a sales threshold (protecting de minimis sellers);
  • The law is not retroactive (reducing the burden on small merchants and the likelihood of double taxation); and
  • The state is a party to the Streamlined Sales and Use Tax Agreement (SSUTA) (reducing the compliance burden on multistate sellers without a traditional physical footprint in a state).


  • The Supreme Court’s decision in “Wayfair” threw out the tenets of the decades-old “Quill” ruling and its “physical presence” requirements that governed state nexus.
  • “Wayfair” has opened the door for several states to move forward on new “internet sales tax” provisions.
  • Your institution should be carefully monitoring the laws (some brand new) of states where you might do business.
  • If you have sales of $100,000 or more or 200 or more transactions in any state(s), that may be an indicator of sales taxes owed.

Specific questions? Email Dave Moja

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.

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