Tomorrow is the federal tax filing deadline, and a recent ruling by the U.S. Supreme Court has California’s small cannabis businesses concerned about being hit with a tax bill from jurisdictions in which they may have never set foot.
Los Angeles marijuana tax lawyers can explain this is a case about the astronomical uptick in e-commerce sales and the right of states to pursue taxes from businesses that conduct online transactions with merchants or buyers in those states, but that have no actual physical presence there.
In a 5-4 decision, the US. Supreme Court in South Dakota v. Wayfair Inc. overturned previous precedent requiring physical presence from an out-of-state seller for a state to establish jurisdiction for purposes of pursing an entity for sales and use taxes. In previous case law, physical presence of an out-of-state seller might include things like inventory storage, office maintenance, meeting attendance or delivery of owned/rented vehicles located in the state. No more.
Plaintiff South Dakota enacted its own law that established grounds to pursue taxes from out-of-state sellers that had an “economic nexis” with either more than 200 separate transactions for goods and delivery sold or with revenue that exceeded $100,000 in a given year. Under the law, the state billed three online retailers – Wayfair, Overstock and Newegg.
All three fought back. While they easily met the minimum requirements for taxation under the state’s law, the corporations argued the state had no grounds on which to pursue this, particularly given prior U.S. Supreme Court precedent.