Under South Dakota law ( if you are not in South Dakota keep reading), retailers have nexus for sales tax purposes if they (1) deliver more than $100,000 of goods or services into the state or (2) engage in 200 or more separate transactions for the delivery of goods or services into the state. In a 5-4 decision on June 21, 2018, the U.S. Supreme Court sided with South Dakota, ruling that the physical presence standard in Quill is "unsound and incorrect." The Court characterized the Quill standard as a "judicially created tax shelter" that benefits internet retailers that limit their physical presence to one or two states, but sell goods and services to consumers in multiple states. 

So What Does This Mean to You? 

As a consumer, it means you will start to see sales tax charged on more and more out of state or internet purchases. As a retailer, it means you may need to start to charge sales tax in states where your product is delivered.

Previously, a retailer needed a physical presence in a state before the state could force you to charge sales tax. This physical presence could be traveling into the state to deliver goods, holding inventory in a state or having sales people in a state. Now, the shipping of items to a state, even by common carrier (UPS/FedEx) can trigger physical presence for sales tax purposes.

The South Dakota law thresholds mentioned above mean that small retailers will continue to be exempt from the sales tax requirements, but based on the Supreme Court ruling, each state will be developing their own thresholds which may be lower than South Dakota’s thresholds.

We recommend businesses develop systems to track the origins of their sales so a determination can be made if sales to a state will be greater than the state’s threshold.

We will continue to monitor each state’s approach to this issue, but if you have any questions, please contact your local Hawkins Ash representative.

July 16

July 31

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September 15

As a business owner, you may have most of your money tied up in your company, which makes saving for retirement especially challenging. If you haven’t already set up a tax-advantaged retirement plan, think about setting one up this year.

Keep in mind that, if you have employees, they generally must be allowed to participate in the plan, provided they work enough hours and meet other qualification requirements.

Here are a few options to consider:

Profit-Sharing Plans

This is a defined contribution plan that allows discretionary employer contributions and flexibility in plan design. You can make deductible 2018 contributions as late as the due date of your 2018 income tax return, including extensions — provided your plan existed on December 31, 2018.

Simplified Employee Pensions (SEPs)

A SEP is a defined contribution plan that provides benefits like those of a profit-sharing plan. But you can establish a SEP in one year and still make deductible contributions as late as the due date of your income tax return for the previous year, including extensions. Another benefit is that a SEP is easier to administer than a profit-sharing plan.

Defined Benefit Plans

This plan sets a future pension benefit and then actuarially calculates the contributions needed to attain that benefit. The maximum annual benefit generally is $220,000 for 2018 (up from $215,000 for 2017) — or 100% of average earned income for the highest three consecutive years, if less. Because it’s actuarially driven, the contribution needed to attain the projected future annual benefit may exceed the maximum contributions allowed by other plans, depending on your age and the desired benefit.

You can make deductible 2018 contributions until the due date of your 2018 income tax return, including extensions — provided your plan existed on December 31, 2018. Warning: Employer contributions are generally required and must be paid quarterly if there was a shortfall in funding for the prior year.