Sales Tax Exemption and the Wayfair Decision

by Robert Banagay, Partner at TTCG

The United States Supreme Court ruled 5-4 in South Dakota v. Wayfair that states can mandate that businesses without a physical presence in a state, but with more than 200 transactions or $100,000 in in-state sales per year, collect and remit sales taxes on taxable transactions in the state. This means such businesses have “nexus” in those states. While states have attempted to compel businesses to do this for several years via different economic nexus rules, Wayfair set a threshold that is fast becoming the law of the land and more and more states are implementing similar laws.

The question at hand is what does the Wayfair Decision have to do with whether items are tax exempt or not. 

Tax exemption means being granted a special exception to a general rule to pay tax. There are three main concerns that a business should have if they cross the economic nexus. These four points of concern are as follows:

·        Are my sales taxable?

·        Whether an exemption applies

  • What is the tax rate?

·        What the filing and reporting requirements are

One free resource that can help them do this is the Uniform Tax Matrix (UTM) available on the TTR website.

This UTM is an extension of the work done by the Streamlined Sales Tax Governing Board, Inc., an organization that assists states in creating a simpler and more uniform sales and use tax system. Currently, 24 states participate in the Streamlined Sales and Use Tax Project. 

Those familiar with the Streamlined Sales and Use Tax Project would agree that the purpose of the project is to help taxpayers get sales tax right and helping state agencies simplify the administration of tax.  Creating and updating tax matrices with tax answers is a time-consuming and complicated process. 

TTR has taken each of the 24 Streamlined Sales and Use Tax Matrices, put all the questions and items in a spreadsheet, removed any duplicates, and then researched answers to those questions across all US states.  In addition, TTR has included several other services and commonly sold products to the list in order to help out smaller businesses that don’t have tax departments. The result is TTR’s Uniform Tax Matrix.

Video on UTM:

Author Bio:


Robert Banagay heads up the consulting team at TTR, a subscription-based website that provides sales, use, and transaction tax answers and tax rates to thousands of companies worldwide. He specializes in all aspects of state tax compliance, including nexus reviews and audits.