Wayfair is like a gold rush for states

M&A dealmakers should stake a claim. Sift through due diligence, excavate the past

Breathtaking chancy crypto currencyThe Supreme Court’s ruling in South Dakota vs. Wayfair created a potential bounty for states and also bountiful complexities for those conducting tax due diligence in transactions. M&A dealmakers must stake a claim by vigilantly sifting through due diligence and excavating the past. That’s because a deal target may have historic nexus and exposures. A buyer cannot simply register to become compliant going forward without cleaning up the past, as that may open it to liability for several previous years, and also interest and penalties.

Wayfair validated a state law requiring remote sellers to collect sales tax when a specific sales volume or transaction level is reached. Application of such an “economic nexus” standard is far more expansive than the traditional physical presence nexus standard. The decision also may apply to income taxes.

Beyond potential tax obligations are costs for compliance such as for internal controls, processes, technology and personnel needs. Wayfair is also making it harder to close deals, and may even impact the closing price.

Watch our video to learn three things to pay particular attention to in M&A due diligence under Wayfair. The time is now to get a handle on Wayfair -- before it hands you a mountain of woes.