Recent U.S. Supreme Court Ruling May Affect Your Business’s Sales Tax Compliance
In our mergers and acquisition practice, we have the opportunity to work closely with our clients on the sometimes challenging process of selling their business. Of the tax issues that are raised by buyers in M&As, one of the most common is a failure by the target to comply with United States sales tax collection. In the U.S., like in Canada, each state sets and administers its own sales tax rules so compliance can be a real challenge.
When sales tax compliance is identified for the first time at exit, the seller loses the opportunity to get ahead of the issue on the seller’s terms, and instead is typically required to make the buyer whole for any costs incurred in achieving compliance.
A recent Supreme Court decision in the United States has further complicated matters. South Dakota v. Wayfair has overturned a long-standing rule relating to state sales tax, and broadened the scope of sales transactions that are subject to sales tax in at least some states.
If your business has sales into the United States, you may want to engage a US advisor to help you determine whether you need to be collecting sales tax in certain US states, and whether that compliance is affected by the recent Wayfair decision.
LaBarge Weinstein LLP does not practice law outside of Canada, but we can work with you to find the right advisors to assist with a US sales tax review. We would also be more than happy to discuss your business’s M&A readiness more generally.