Is Wayfair “Not Fair” to Nonprofits?

On June 21, the Supreme Court ruled on a case that is already causing some major ramifications for e-commerce sales across the country.

In Wayfair v. South Dakota, the state legislature enacted a state law requiring many businesses selling online to state residents to collect and remit state sales tax to South Dakota. The Supreme Court decided in June that the South Dakota law is valid; overturning its own previous decisions regarding the matter and signaling to states nationwide that related state laws may be constitutional.

More than 30 states have similar laws that were waiting on an indication of validity from the Supreme Court, and Michigan looks to be one of the first states to signal implementation: the state recently announced that it will begin to collect sales tax from certain sellers into the state on October 1, 2018.

Much of the conversation around the Court’s decision is focused on how broad or narrow to take the ruling. One thing often left out of the discussion is how nonprofit organizations are impacted by the various laws. Organizations of all sizes engage in social entrepreneurship to raise awareness and funds – funds that are invested in their communities. While many states already exempt nonprofit organizations from the remittance of state sales tax, online sales tax laws are separate. Ensuring that online sales tax legislation exempts nonprofit organizations is crucial to allowing those community-based organizations to put their resources where it matters – into the community – and not into the administrative process of tax collection.

With more than 30 state laws and four proposed laws currently active in Congress, it will be critical to remind lawmakers at the local and national level of the impact nonprofits make in your community. Additional taxes and administrative costs can directly shift a nonprofit’s ability to fulfill its mission to serve.