Moving fast, Wisconsin is one of the first states in the US set to require out-of-state businesses to collect sales tax. Wisconsin's levy begins Oct. 1. The US Supreme Court decision in South Dakota v. Wayfair Inc. has provided states the option to require out-of-state businesses to collect and remit sales tax including those businesses that sell over the Internet.
The Badger State prepped for this for years. A 2013 law, part of the budget that year, says the state must cut income taxes if any federal law changed the sales tax revenue income for the state. A Supreme Court decision is not a federal law, going strictly by the books. However, the current administration says it will honor the income tax cut provision and savings will be passed to citizens. The Legislative Fiscal Bureau projects the tax will bring in $90 million the first year and another $120 in the next year. Using those numbers, the average taxpayer in America's Dairyland will see a $52 cut in income taxes.
Residents are required to pay a "use tax" for online purchases now, but this law is rarely obeyed or enforced. By shifting the burden to the retailers, enforcement can be pursued more easily.
In Wisconsin, the state collects five percent. A majority, 65, of Wisconsin's counties add another .5 percent to that. The state also allows special tax districts that can collect .1 percent, pushing the total levy in some places to 5.6 percent.
While the Badger State plans to start collecting, small businesses are wondering what the tax means to them. The SCOTUS decision upholds a South Dakota law that specifically exempts businesses with less than 200 sales a year or less than $100,000 in annual sales. Wisconsin does have some small retailers who fall below those thresholds and some who dance back and forth over that line. Certainly, other states have businesses that do the same. A question remains as to what "small business" exception will apply in Wisconsin.