Subject Matter Experts

Dillon Tax Consulting provides tax advisory and compliance services and solutions to companies across all industries, ranging in revenue size from several hundred thousand dollars to multi-billion dollars. We are your subject matter experts regarding the following State & Local Tax matters:

  • Sales & Use Tax
  • Transaction Tax
  • Admissions/Meals Tax
  • Business License Tax
  • Gross Receipts Tax
  • Use & Occupancy Tax
  • Income/Franchise Tax
  • Capital Stock Tax
  • Personal Property Tax

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South Carolina's Expansive Treatment of Cloud Computing Services as Taxable Communications

11/24/2014

As states continue to wrestle to define tax policy for the services that comprise the expanding world of cloud computing, South Carolina has again asserted its expansive approach for taxing anything that resembles communications services, including charges for Software As a Service (SAaS) or Platform As a Service (PAaS). [Private Letter Ruling #14-4, South Carolina, (Nov. 4, 2014)] In its most recent private ruling on the matter, the Department determined that the Taxpayer’s charges for a cloud-based service for processing and routing calls within a customer's communications system and for other support services constitute “charges for the ways ...

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An Interview with Bloomberg BNA: Will the Internet Tax Freedom Act Prohibit States From Taxing the 'Internet of Things'?

9/10/2014

Telematics services, or the "Internet of Things", require Internet access and Internet related services in order to be provided. The Internet Tax Freedom Act dictates that in most instances, "Internet access" shall be exempt from sales tax. It remains to be seen how states will define telematics and seek to apply existing or new sales tax laws to these services. However, the Internet Tax Freedom Act - set to expire on November 1, 2014 absent Congressional action - may play a significant role in defining state authority to impose sales taxes on this rapidly evolving and pervasive new industry sector.

I recently ...

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Virginia Ignores ITFA and Issues Tax Rulings on Internet Activation and Reactivation Fees

9/10/2014

In two recent rulings, Virginia Ruling of the Commissioner PD 14-130 and 14-131, the Virginia Commissioner ruled that Internet activation and Internet reactivation fees are not exempt under the Internet Tax Freedom Act. Rather they are subject to Virginia's communications sales tax. In Bloomberg BNA's 9/5/14 Sales Tax Slice blog posting, Mark Kennedy interviews me to discuss these decisions.

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U.S. Supreme Court Grants Review of Jurisdictional Decision Regarding Colorado Notification Law

7/4/2014

On July 1, 2014, the United States Supreme Court granted the petition for writ of certiorari filed by Petitioner Direct Marketing Association (DMA) in a case involving Colorado’s controversial notification law. [Direct Marketing Association v. Brohl, U.S. Supreme Court, Dkt. 13-1032, petition for certiorari granted July 1, 2014] This case stems from Colorado’s affiliate nexus and notification law codified at Colorado Code Section 39-21-112(3.5) and related regulations, which required out-of-state retailers with no physical presence or sales/use tax compliance obligations in Colorado to notify its Colorado customers of their obligation to self-report and pay ...

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SEEKING WHAT YOU NEED TO HEAR vs. SEEKING WHAT YOU WANT TO HEAR

6/30/2014

Sometimes my job can be quite difficult. I don’t enjoy telling the client that they have nexus, and/or that they have sales tax exposure in a state that they should address as soon as possible. Trust me, I would much rather share the news with a client that everything they are doing is perfect and that they don’t need my help. And having worked as the Tax Director for a publicly-traded company, and in the Tax Department of a $Multi-billion communications company, I consider myself a pragmatist. That is, I believe in seeking not only the technical ...

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MARYLAND HIGH COURT ATTRIBUTES NEXUS TO OUT-OF-STATE AFFILIATES DUE TO LACK OF ‘ECONOMIC SUBSTANCE’, NOT BASED ON UNITARY NEXUS

4/2/2014

On March 24, 2014, Maryland’s highest court, the Court of Appeals, upheld a finding of nexus against two Delaware affiliates of W.L. Gore & Associates, Ltd. (Gore), on the premise that the affiliates lacked any economic substance [Gore Enterprise Holdings, Inc. v. Comptroller of the Treasury, Md. Ct. App., No 36 (March 24, 2014)] In so doing, the court also rejected the lower court’s determination that the affiliates had Maryland nexus on the basis that they were part of a unitary business with Gore.

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JUDGE SPARES REMOTE SELLERS FROM COLORADO NOTICE REQUIREMENTS

4/2/2014

On February 18, 2014, a Colorado judge enjoined the Colorado Department of Revenue’s enforcement of the remote seller sales and use tax notification requirements enacted by the Colorado legislature in 2010. [Direct Marketing Association v. Dep't of Revenue et al.; District Court, City and County of Denver, Case No. 13CV34855 (2/18/14)] Under the law, non-resident retailers are required to notify their buyers of the use tax that may be due on each transaction, and to provide annual reports to such buyers, as well as file reports with the state summarizing Colorado purchases by such buyers. Readers ...

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Recent Blog Articles

Recent Blog Articles

Economic Nexus Update – AZ, MD, OK, MN

Economic Nexus Update – AZ, MD, OK, MN

6/5/2019 12:00:00 AM EDT
3 weeks ago

As we have previously reported, since the U.S. Supreme Court’s landmark decision in South Dakota v. Wayfair, 585 U.S. __ (June 21, 2018), forty-three (43) states have adopted economic nexus provisions for sales tax compliance purposes.  Arizona and Oklahoma are most recent states to enact an economic nexus provision for remote sellers.

Since last reporting on this subject in early May, we have also seen two (2) more states choosing to impose sales tax compliance obligations on marketplace providers or facilitators, with this number now at twenty-eight (28) states.  Furthermore, recently enacted Minnesota legislation changes the economic nexus threshold for remote sellers and remote marketplace providers.

We highlight some of these below:

  1. States Adopt or Modify Economic Nexus Provisions – AZ, OK, MN
  • Arizona - Beginning October 1, 2019, HB 2757 provides that remote sellers are required to collect and report sales tax if, in 2019 they have aggregate sales of tangible personal property exceeding $200,000 (this number reduces to $150,000 in 2020 and $100,000 in 2021), or otherwise has physical presence nexus.
  • Oklahoma – Beginning November 1, 2019, SB 513 provides that remote sellers are required to collect and report sales tax if, during the during the preceding or current calendar year, they have aggregate taxable sales of tangible personal property of $100,000 or more.
  • Minnesota - Beginning October 1, 2019, HF 5 changes the economic threshold for remote sellers and remote marketplace providers to 200 or more retail sales during the prior 12-month period; or retail sales totaling more than $100,000 during the prior 12-month period.  Furthermore, all marketplace providers are required to collect and remit tax on sales they facilitate unless a retailer provides the marketplace provider with a copy of its registration to collect the tax, and the marketplace provider and retailer agree that the retailer will collect the tax on these sales.  Nothing prohibits the retailer and marketplace providers from entering into an agreement about who will collect and remit the tax.

 

  1. States Adopt or Modify Marketplace Nexus & Compliance Provisions – AZ, MD, MN
  • Arizona - Beginning October 1, 2019, HB 2757 provides that marketplace providers (listing products on a marketplace and billing and collecting from the purchaser) are required to collect and report sales tax if it has aggregate sales exceeding $100,000, or otherwise has physical presence nexus.
  • Maryland - Beginning October 1, 2019, HB 1301 provides that marketplace providers are required to collect and separately report sales tax if, in the previous or current calendar year, it had aggregate sales exceeding $100,000 or 200 transactions, or otherwise has physical presence nexus. The marketplace
  • Minnesota - Beginning October 1, 2019, HF 5 changes the economic threshold for remote sellers and remote marketplace providers to 200 or more retail sales during the prior 12-month period; or retail sales totaling more than $100,000 during the prior 12-month period.  Furthermore, all marketplace providers are required to collect and remit tax on sales they facilitate unless a retailer provides the marketplace provider with a copy of its registration to collect the tax, and the marketplace provider and retailer agree that the retailer will collect the tax on these sales.  Nothing prohibits the retailer and marketplace providers from entering into an agreement about who will collect and remit the tax.

 

We will continue to monitor these state legislative and administrative changes as they impact sales tax nexus and compliance obligations for remote sellers, and have updated the Economic Nexus Reference Tools on our website for you.

Economic Nexus Update – CA, NY, SC, IN, UT

Economic Nexus Update – CA, NY, SC, IN, UT

5/16/2019 12:00:00 AM EDT
a month ago

As we have previously reported, since the U.S. Supreme Court’s landmark decision in South Dakota v. Wayfair, 585 U.S. __ (June 21, 2018), forty-two (42) states have adopted economic nexus provisions for sales tax compliance purposes.  The most compelling change for states that have adopted economic nexus is that California has enacted Assembly Bill 147, which increases the economic nexus threshold for remote sellers to $500,000 in annual sales from the previously adopted $100,000 threshold, and removes the transaction count threshold.

Since last reporting on this subject in mid-April, we have also seen five (5) more states choosing to impose sales tax compliance obligations on marketplace providers or facilitators, with this number now at twenty-six (26) states. 

We highlight some of these below:

  1. States Will Adopt Marketplace Nexus Provisions –NY, SC, IN, CA, UT
  • South Carolina - Beginning April 26, 2019, SB 214 provides that marketplace providers (listing products on a marketplace and billing and collecting from the purchaser) are required to collect sales tax if, in the previous or current calendar year, it had aggregate sales exceeding $100,000 or 200 transactions, or otherwise has physical presence nexus.
  • New York – Beginning June 1, 2019, SB 1509 codifies New York’s long-held audit position that marketplace providers are co-vendors are required to collect sales tax if, in the previous four quarters, it had aggregate sales of property to New York customers exceeding $300,000 AND 100 transactions, or otherwise has physical presence nexus.
  • Indiana – Beginning July 1, 2019, HB 1001 provides that marketplace providers (providing a marketplace and doing any of the following: collecting the purchase price, charging/collecting a fee for using the marketplace or providing payment processing) are required to collect sales tax if, in the previous or current calendar year, it had aggregate sales exceeding $100,000 or 200 transactions, or otherwise has physical presence nexus.
  • California – Beginning October 1, 2019, AB 147 provides that that marketplace providers (listing products on a marketplace and billing and collecting from the purchaser) are classified as the retailer and are required to collect sales tax if, in the previous or current calendar year, it had aggregate sales exceeding $500,000, or otherwise has physical presence nexus.
  • Utah - Beginning October 1, 2019, SB 168 provides that that marketplace providers are required to collect sales tax if, in the previous or current calendar year, it had aggregate sales exceeding $100,000 or 200 transactions, or otherwise has physical presence nexus.

 

We will continue to monitor these state legislative and administrative changes as they impact sales tax nexus and compliance obligations for remote sellers, and have updated the Economic Nexus Reference Tools on our website for you.

Economic Nexus Update – ID, RI, KY, VA, AR, NM, WV, WY, ND, HI

Economic Nexus Update – ID, RI, KY, VA, AR, NM, WV, WY, ND, HI

4/19/2019 12:00:00 AM EDT
2 months ago

Since the U.S. Supreme Court’s landmark decision in South Dakota v. Wayfair, 585 U.S. __ (June 21, 2018), forty-two (42) states have adopted economic nexus provisions for sales tax compliance purposes.  With the state legislative sessions in full swing, we are seeing the predictions become a reality.  The most compelling change is the expected upswing in the number of states choosing to impose sales tax compliance obligations on marketplace providers or facilitators, with this number now at twenty-one (21) states.  We highlight some of these below:

 

  1. States Will Adopt Economic Nexus – ID, VA, AR, NM

  • Idaho – Beginning June 1, 2019, HB 259 requires remote sellers to collect sales tax if, in the previous or current calendar year, it had aggregate sales within the state, or deliveries to locations within the state, exceeding $100,000.
  • Virginia – Effective July 1, 2019, HB 1722 / SB 1083 provides that remote sellers are required to register, collect and remit retail sales and use if they have more than $100,000 in annual gross revenue from sales in Virginia, or at least 200 separate sales transactions in Virginia in the previous or current calendar year.
  • Arkansas – Beginning July 1, 2019, SB 576 provides that remote sellers are required to collect sales tax if, in the previous or current calendar year, it had aggregate sales within the state, or deliveries to locations within the state, exceeding $100,000 or 200 transactions.  A sale made through a marketplace facilitator constitutes a sale of the marketplace facilitator for purposes of satisfying the economic nexus thresholds and not a sale of the marketplace seller.
  • New Mexico – Beginning July 1, 2019, HB 6 provides that remote sellers are required to remit gross receipts tax if, in the previous calendar year, it had aggregate gross receipts from sales, leases and licenses of tangible personal property, or sales of licenses or services sourced to New Mexico of $100,000 or more.  A marketplace seller may deduct receipts from transactions facilitated by a marketplace provider. However, to take a deduction the seller must get documentation from the marketplace provider showing that the marketplace provider is registered with the Taxation and Revenue Department, and has remitted or will remit taxes for those transactions.

 

  1. States Will Eliminate Notice and Reporting Requirements

  • Kentucky  - HB 354 eliminates the use tax notice requirements for remote sellers.

 

  1. States Will Adopt Marketplace Nexus Provisions – ID, RI, KY, VA, AR, NM, WV, WY, ND, HI

 

  • Idaho – Beginning June 1, 2019, HB 259 requires remote sellers and marketplace facilitators to collect sales tax if, in the previous or current calendar year, it had aggregate sales within the state, or deliveries to locations within the state, exceeding $100,000.  The bill requires marketplace facilitators to obtain a separate seller’s permit for collecting sales and use taxes on transactions facilitated for third-party sellers.
  • Kentucky – Beginning July 1, 2019, HB 354 provides that marketplace providers are required to collect sales tax if, in the previous or current calendar year, it had aggregate sales within the state, or deliveries to locations within the state, exceeding $100,000 or 200 transactions.
  • Virginia – Effective July 1, 2019, HB 1722 / SB 1083 provides that Remote sellers and marketplace facilitators are required to register, collect and remit retail sales and use if they have more than $100,000 in annual gross revenue from sales in Virginia, or at least 200 separate sales transactions in Virginia in the previous or current calendar year.
  • Arkansas – Beginning July 1, 2019, SB 576 provides that remote sellers and marketplace facilitators are required to collect sales tax if, in the previous or current calendar year, it had aggregate sales within the state, or deliveries to locations within the state, exceeding $100,000 or 200 transactions.  A sale made through a marketplace facilitator constitutes a sale of the marketplace facilitator for purposes of satisfying the economic nexus thresholds and not a sale of the marketplace seller.
  • New Mexico – Beginning July 1, 2019, HB 6 provides that remote sellers and marketplace providers are required to remit gross receipts tax if, in the previous calendar year, it had aggregate gross receipts from sales, leases and licenses of tangible personal property, or sales of licenses or services sourced to New Mexico of $100,000 or more.
  • West Virginia – Beginning July 1, 2019, HB 2813 codifies economic nexus threshold and imposes economic nexus provisions for marketplace facilitators and referrers, in addition to remote sellers. A marketplace facilitator, referrer, or remote seller is required to collect use tax when sales equal or exceed $100,000 in gross revenue or 200 or more separate transactions for an immediately preceding or current calendar year.  A “marketplace facilitator” is defined as a person that contracts with one or more sellers to facilitate (for consideration) sales of the seller’s products through an electronic of physical marketplace. A marketplace facilitator engages in activities, directly or indirectly, such as communicating offers between buyers and marketplace sellers, owning or operating electronic or physical infrastructure that brings together buyers and sellers, or providing a virtual currency used by purchasers.
  • Wyoming – Effective July 1, 2019, HB 69 provides that marketplace facilitators are required to collect and remit sales tax on all sales that the marketplace facilitator makes on its own behalf as well as sales that the facilitator facilitates on behalf of all marketplace sellers to customers in Wyoming, when sales equal or exceed $100,000 in gross revenue or 200 or more separate transactions for an immediately preceding or current calendar year.  The marketplace facilitator must collect sales tax regardless of whether the marketplace seller has a sales tax permit or otherwise would have been required to collect sales tax if the sale had not been facilitated by the marketplace facilitator.
  • North Dakota – Effective October 1, 2019, SB 2338 provides that marketplace facilitators are considered retailers subject to North Dakota sales and use tax if they facilitate sales of property or services that are subject to North Dakota sales tax and gross sales into North Dakota exceed $100,000 in the previous or current calendar year. 
  • Hawaii – Beginning January 1, 2020, SB 396 imposes general excise tax compliance obligations on marketplace facilitators, as the sellers of tangible personalproperty, intangible property or services for sales and use tax purposes. A new definition of "marketplace facilitator" was enacted and means any person who sells or assists in the sale of tangible personal property, intangible property, or services on behalf of another seller by providing a forum, whether physical or electronic, in which sellers list or advertise tangible personal property, intangible property, or services for sale; and collecting payment from the purchaser, either directly or indirectly through an agreement with a third party.

 

We will continue to monitor these state legislative and administrative changes as they impact sales tax nexus and compliance obligations for remote sellers, and have updated the Economic Nexus Reference Tools

State Economic Nexus Standards

State Economic Nexus Standards

3/26/2019 12:00:00 AM EDT
3 months ago

State Economic Nexus Standards - UPDATED AS OF 6/5/19

In the wake of the U.S. Supreme Court's decision in South Dakota v. Wayfair, states may now require remote sellers with no physical presence in a state to collect sales tax on sales of taxable products and services delivered to customers in that state.  This ruling does not simply affect online retailers, but all sellers of taxable goods and services who make sales into state in which they lack physical presence.  Attached as an informational reference tool is a listing of the states that have adopted some form of economic nexus standard.  As noted, many of these states have adopted Notice and Reporting Requirements, which may impose obligations on a remote seller regardless of whether the seller exceeds the state's economic nexus thresholds.  However the trend is for states to either not adopt Notice and Reporting election provisions or to eliminated them, as Washington State recently did.

Each of these states may have aspects of their laws that vary form the South Dakota law, which itself is still subject to consideration on remand from the US Supreme Court to the lower court for aspects of the the law not inconsistent with the Court's ruling in Wayfair regarding the physical presence rule.  As such, each of these state economic nexus standards may be subject to judicial scrutiny to the extnet they may impose an undue burden on interstate commerce.  Furthermore, states that have adopted these laws are only beginning to address the effective date that they intend to implement enforcement of the economic nexus standard in their state.  

 

State Marketplace Facilitator Compliance Standards

Since Washington State first adopted a requirement that marketplace providers must collect and remit sales tax directly to the Department for all sales made on their marketplace, more states have chosen to impose sales tax compliance obligations on marketplace providers or facilitators, with this number now at twenty-eight (28) states. Attached as an informational reference tool is a listing of the states that have adopted some form of a marketplace facilitator nexus standard.  Though the deifnition of a marketplace facilitator must be determined on a state by state basis (and is beyond the scope of this article), typically a marketplace facilitator is a business that provides a forum or platform on which third party sellers can advertise and sell their products, and on which the marketplace also provides billing and collection (directly or indirectly), or sets prices, or provides inventory storage and/or fulfillment services, among other things. The more recent trend among states, including California, is to adopt a broader definition of “marketplace facilitator”, including any business that lists a marketplace seller’s items for sale on their platforms.

 

State Notice & Reporting Requirements

A number of states have also adopted Notice & Reporting Requirements, which compel remote sellers, typically whose annual sales exceed a certain threshold - often as low as $10,000 - to elect to either (1) to collect and remit sales tax on sales to customers in the state, despite lacking a physical presence, or (2) to notify customers on their website and on each invoice of the customer’s use tax reporting obligation, and to provide annual information to each customer and to the Department of Revenue regarding all sales customers in the state.  Failure to do so results in penalties that typically are larger than the remote sellers sales in that state.  For your consideration, attached as an informational tool is a listing of the states that have adopted notice and reporting requirements.

As such, it is incumbent on every remote seller to proactively engage someone - externally or internally - to closely monitor these and every state regarding implementation and enforcement of these provisions.  Furthermore, every remote seller should implement processes to proactively monitor its sales activity - by revenue and transaction amount - both historically and prospectively, to ensure that they are meeting their obligations in each state and mitigating any historical exposure.  Lastly, to the extent that a remote seller has or had physical presence nexus in a state (eg., by virtue of inventory in a third party fulfillment center), that seller should engage an expert to discuss the options to register and/or negotiate resolution of historical liabilities. 

Economic Nexus Update – GA, NE, ND, NY, OK, TN, WA

Economic Nexus Update – GA, NE, ND, NY, OK, TN, WA

3/26/2019 12:00:00 AM EDT
3 months ago

Since the U.S. Supreme Court’s landmark decision in South Dakota v. Wayfair, 585 U.S. __ (June 21, 2018), we now have thirty-eight (38) states that have adopted economic nexus provisions for sales tax compliance purposes.  With the state legislative sessions in full swing, we are seeing the predictions become a reality.  We highlight some of these below:

Wayfair: The U.S. Supreme Court Throws Out the Physical Presence Requirement for Sales Tax Nexus – What Does This Mean for Remote Sellers?

Wayfair: The U.S. Supreme Court Throws Out the Physical Presence Requirement for Sales Tax Nexus – What Does This Mean for Remote Sellers?

6/22/2018 12:00:00 AM EDT
1 years ago

As I predicted in my March 24, 2018 article “The Future of the Quill Sales Tax “Physical Presence” Nexus Standard – Part Two”, yesterday the United States Supreme Court threw out the 51 year old physical presence sales tax nexus standard, when it rendered its decision in South Dakota v. Wayfair, Inc., et al., 585 U.S. __ (June 21, 2018).  At issue was whether South Dakota may require remote sellers to collect and remit sales tax without some additional connection in the State other than more than $100,000 in annual sales or more than 200 transactions.  The Supreme Court held that Quill Corp. v. North Dakota and National Bellas Hess Inc. v. Department of Revenue of Illinois -- which held that a state cannot require an out-of-state seller with no physical presence in the state to collect and remit sales taxes on goods the seller ships to consumers in the state -- are overruled, upheld the South Dakota nexus threshold, and remanded the case for further proceedings consistent with removal of the physical presence nexus standard.

The Future of the Quill Sales Tax “Physical Presence” Nexus Standard – Part Two

The Future of the Quill Sales Tax “Physical Presence” Nexus Standard – Part Two

3/24/2018 12:00:00 AM EDT
1 years ago

In Part One of this two-part article, we discussed the physical-presence requirement for sales tax nexus, as established by the U.S. Supreme Court in the 1992 case Quill Corp. v. North Dakota, 504 U.S. 298 (1992).  We also provided an overview of the Court’s decisions that led to the Quill physical-presence standard, Congress’s inability to change or overrule the decision through legislation, and state efforts to expand or ignore the physical-presence standard, through attributional and agency nexus theories, click-through and affiliate nexus provisions, use tax reporting and notification standards, and most recently, economic nexus standards. 

The Future of the Quill Sales Tax “Physical Presence” Nexus Standard – Part One

The Future of the Quill Sales Tax “Physical Presence” Nexus Standard – Part One

3/7/2018 12:00:00 AM EST
1 years ago

The United States Supreme Court is set to hear oral arguments on April 17, 2018, in South Dakota v. Wayfair, Inc. et. al. [South Dakota v. Wayfair Inc., et. al., 901 N.W.2d 754 (S.D. September 13, 2017); cert. granted (U.S. January 12, 2018)(No. 17-494)]  At issue is whether the Court should abrogate Quill's sales-tax-only, physical-presence requirement?