Why Am I Paying Sales Tax?

Supreme Court Decision | Economic Nexus? | What Happens to My Sales Tax Payment? | FA Sucks Now

In this article:

  • We explain why we must now collect sales tax for states outside of our physical location due to Wayfair v. South Dakota Supreme Court decision.
  • We identify what is done with the sales tax payment after it is collected.
  • We explain that all current arcade parts businesses are responsible for paying sales tax by state once they reach economic nexus. The most popular stores likely have reached nexus even if they do not know it. You will eventually see them charging sales tax as they must comply with this tax law, or face severe fines if they ignore it, are later found out, and are forced to audit.


You might have noticed that Amazon.com started charging you sales tax for purchases last year.  The internet was long regarded a safe haven for customers looking to purchase without paying sales tax, simply because those businesses they interact with did not have a physical presence in their home state.

Supreme Court Decision

In June 2018, the U.S. Supreme Court decided Wayfair v. South Dakota, holding that states can apply their sales tax laws to out-of-state retailers even if the retailer has no physical presence in the state.  This is called Economic Nexus.

Economic Nexus?

All legitimate businesses register in their home state to pay sales tax as applicable. This is called physical nexus. This means each time someone in their state makes a purchase at their store, they pay the state tax.  This is no different than visiting a physical store in your state, and paying sales tax.  We reside in Pennsylvania, and have charged the appropriate sales tax to customers whose orders shipped to a Pennsylvania address since the business began in 2010.

Now, due to the Supreme Court decision, businesses must register in a state regardless of whether they have a physical presence there, should they pass the state's economic nexus threshold. This threshold varies by state, but most are $100,000 or just 200 transactions made from that state per year.  Once a business reaches this threshold, it is required to collect and pay sales tax to the state that the product is shipped to.

Many states have passed the law to begin collecting sales tax under economic nexus. We're responsible for paying any taxes that should be collected from that point, if we passed economic threshold.  Collecting state taxes is required by law - failure to do so can result in heavy fines.

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What will You Do with My Sales Tax Payment?

We do not keep your sales tax payments.  As we do in Pennsylvania, we must remit ALL taxes collected to each of these states. For example, if the purchase is shipped to a resident in Maryland, we must remit sales tax of 6% to the state.

What about Purchases Shipping Outside of USA?

Sales tax cannot be collected for purchases shipping outside of the USA.  Your country will have their own VAT taxes for imports.

FA Sucks Now! Guess It's Time to Visit [STORE X] Because They Don't Charge Sales Tax in My State.

Depending on your state's own laws for economic Nexus, the Wayfair vs South Dakota Supreme court decision can and likely will affect all video game and arcade parts retailers. While some states like California have recently changed their requirements, most economic nexus thresholds - especially based on transaction quantity - are very low in many states.  We were surprised at how many states we have already crossed into economic nexus over the past year. Two hundred transactions in a year per state is rather small due to the number of small value transactions that are made on our website.  The state does not distinguish a transaction for a $2.00 spring, or a $1000 arcade cabinet. As a result, it is likely that your favorite store is already responsible for collecting sales taxes in your state, even if they are not collecting it yet. The longer they wait, the more they owe in back-taxes, penalties and interest. Those businesses must pay those back-taxes even if they do not collect them.

This is not fun for us or any online business, as they must:

  • Confirm that they have reached economic nexus in each state. We did this through a 3rd party tax service.
  • Register themselves in the state (takes weeks to file)
  • Begin collecting sales tax
  • Remit payment to the state based on their monthly, quarterly or annual tax schedule
  • Pay any back taxes if they qualified for Economic Nexus before they registered. This can cost several hundred to several thousand dollars.

Once registered, there is no way to un-register even if quantity of sales to the state decline below economic nexus over a 12 month period.

What's more, states whose economic nexus laws were passed before now have the right to inquire about any retailer's registration date.  For example, if the retailer claims that they only achieved nexus recently in order to potentially avoid taxes, the state can request an audit.  If the audit shows they reached the nexus threshold much earlier, they are responsible to pay for those retroactive taxes, even if they did not collect them.  Given the number of transactions earned for the popular arcade parts stores, those costs are substantial. Some may try to dodge it, but aren't many major arcade parts businesses that specialize in serving the fighting game community. Those states will likely be keen to who they are, and may eventually contact them for an audit.

Should you have any further questions, please feel free to send us a message by clicking on "Have more questions? Feel free to submit a request on the bottom of each customer service page.

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