From Melinda May, CPA | Featherstone

If your company makes sales to out-of-state buyers, do you need to collect state sales tax? Until recently, Supreme Court decisions from the 20th century declared that would not necessarily be the case.

Example 1: ABC Corp., based in Alabama, sends a catalogue to customers and prospects. A consumer who lives in Wyoming places a $100 order.

Assume that ABC has neither employees nor property in Wyoming. ABC would not be required to collect Wyoming sales tax on the $100 purchase price and remit to Wyoming under those Supreme Court decisions because ABC had no “physical presence” in that state. (Wyoming, like most states, requires consumers to pay a use tax instead of a sales tax, but states have found it difficult to enforce compliance with their use taxes.)

Because they must collect sales tax, in-state retailers have been at a significant disadvantage versus out-of-state sellers who don’t collect sales tax.


Featherstone LLC provides Tax Planning & Preparation, Accounting and CFO Consulting. Please contact the company by email at info@featherstonecpa.com or by calling 540-227-4321.