US South Dakota ends foreign seller sales tax transaction threshold July 2023

Remote or out-of-state e-commerce sellers will have to register with Department of Revenue and charge 4.5% sales tax only is sales about US$100,000

South Dakota is removing the sales tax transaction threshold of 100 or more sales for out-of-state sellers from 1 July 2023. This means there will only be a single annual sales threshold of US$ 100,000 in gross revenues from in-state sales.

Many US states have two threshold tests (see table below) for their sales tax obligations on remote or foreign sellers:

1. Number of transactions per year (typically 100 or 200); and / or
2. Gross value of sales above threshold (typically US$100k or US$ 200k).

However many have recently been withdrawing the first, transaction threshold like South Dakota is proposing now. These include Maine last year.

US Economic nexus on sales tax following South Dakota vs Wayfair

South Dakota vs Wayfair 2018 Supreme Court ruling launched the concept of ‘economic nexus’ meaning the act of just selling to local consumers from out of state could trigger in-state sales tax obligations for non-resident sellers. Previously, the ‘phyiscal nexus’ test was the sole test, which meant only if there were staff, retail or storage sites in state would sales tax apply.

Since the 2018 ruling, some 40 states have followed South Dakota and imposed both financial and transaction number thresholds. See table below.

US Sales Tax rates and selling thresholds