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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
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  • Gross Receipts Tax
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Sales Tax on Cloud-computing: Rulings Also Mean More Uncertainty and Unpredictability

Michael T. Dillon, Esq., Dillon Tax Consulting LLC
12/13/2016

A number of sales tax decisions in Tennessee, Indiana and Illinois serve to remind us all of the uncertainty involving cloud computing transactions, and the importance to seek guidance from tax practitioners regarding your specific facts.  While each taxpayers’ facts involved the access to and/or provision of cloud-based services, the transactions for each were unique, as were the States and their analysis / conclusions.  One state decided that the taxpayer’s cloud-computing transactions were taxable, whereas the other states determined that the cloud-based transactions were not taxable sales.  These rulings, while pertinent to the taxpayers at issue, only add to ...

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Florida Sales Tax Case Presents Opportunity for Supreme Court to Revisit the Quill Nexus Standard

Michael T. Dillon, Esq., Dillon Tax Consulting LLC
11/8/2016

In a petition filed with the Supreme Court of the United States on October 24, 2016, American Business USA Corporation (American Business) seeks a writ of certiori to review the judgment of the Supreme Court of Florida.  [American Business USA Corp. v. Florida Department of Revenue, U.S. Supreme Court, Dkt. 16-567, petition for certiorari filed October 24, 2016]  In its petition, American Business asks whether a state can “collect sales tax on out-of-state property ordered over the internet for out-of-state delivery by relying on this (Supreme) Court’s decision in Quill Corp. v. North Dakota, 504 U.S. 298 ...

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Texas Court says the “Essence of Transaction” involving a Provider’s technology platform is not “Data Processing”

Michael T. Dillon, Esq., Dillon Tax Consulting LLC
5/10/2016

In a decision involving the true object, or  “essence of the transaction” test, the Texas court of appeals upheld the trial court’s decision in favor of the taxpayer refund claim for sales tax assessed on the provision of bill pay services.  In Hegar v. CheckFree Services Corporation, NO. 14-15-00027-CV (Tex. Ct. App., April 19, 2016), the Court of Appeals affirmed the trial court’s judgment in favor of CheckFree, awarding it a refund of sales tax paid on bill pay services provided to banks.  CheckFree contracted with several banks to provide bill pay services through the banks’ on-line banking ...

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Recent Blog Articles

Recent Blog Articles

State Economic Nexus Standards

State Economic Nexus Standards

7/2/2019 12:00:00 AM EDT
2 weeks ago

State Economic Nexus Standards - UPDATED AS OF 7/2/19

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 thirty-one (31) 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: July 2, 2019 – CO, CT, IL, ME, NY

Economic Nexus Update: July 2, 2019 – CO, CT, IL, ME, NY

7/2/2019 12:00:00 AM EDT
2 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.  The biggest trends right now are that states are revising their thresholds and also adopting marketplace nexus provisions.

Recently enacted New York legislation increases the economic nexus threshold for remote sellers and remote marketplace providers, while Connecticut reduces its threshold.  Colorado codifies its Department’s rules and Maine and Illinois adopt marketplace facilitator provisions.

We highlight some of these below:

  1. States Adopt or Modify Economic Nexus Provisions – CO, CT, NY
  • Colorado – Effective June 1, 2019, HB 1240 codifies rules previously enforced by the Department of Revenue relating to economic nexus, marketplace nexus and sourcing.  As such, the legislation codifies that economic nexus applies to out-of-state retailers with over $100,000 in sales into Colorado during the last calendar year. If the sales threshold was not met in the last calendar year, once it is met during the current calendar year, the retailer has 90 days from the time it is met to start collecting and remitting.  In addition, the legislation adopted destination sourcing for sales to Colorado customers.  As such, sales tax rates and collections are based on the customer location to which items are shipped or picked up by the customer.
  • Connecticut – Beginning July 1, 2019, HB 7424 reduces the economic nexus threshold from $250,000 to $100,000 in sales of tangible personal property delivered in New York.  The additional requirement of more than 200 sales delivered in Connecticut remains the same.  The measurement period remains the prior twelve months.  The legislation also eliminates the condition that such retailers be regularly or systematically soliciting sales in Connecticut.   The same threshold now applies for click-through nexus, which had previously also been $250,000 in gross receipts as a result of a referral agreement with a Connecticut person.
  • New York – Retroactively applied back to June 21, 2018, SB 6615 increases the economic nexus threshold from more than $300,000 to more than $500,000 in sales of tangible personal property delivered in New York.  The additional requirement of more than 100 sales of tangible personal property delivered in New York remains the same.  The measurement period remains the immediately preceding four sales tax quarters.

 

  1. States Adopt or Modify Marketplace Nexus & Compliance Provisions – CO, IL, ME, NY
  • Colorado – Beginning October 1, 2019, HB 1240 provides that marketplace facilitators are required to collect and report sales tax if they had over $100,000 in sales into Colorado during the last calendar year.  For purposes of the legislation, a marketplace facilitator is an entity that facilitates sales of marketplace sellers to purchasers on its platform and that may retain a fee for its service. The marketplace facilitator also communicates the offer between the buyer and seller; and provides a payment processing service for both parties.  In addition, the legislation adopted destination sourcing for sales to Colorado customers.  As such, sales tax rates and collections are based on the customer location to which items are shipped or picked up by the customer.
  • Illinois - Beginning January 1, 2020, P.A. 101-09 provides that marketplace facilitators are required to collect and report sales tax if, in the previous twelve months, it had aggregate sales of $100,000 or 200 transactions, or otherwise has physical presence nexus. For purposes of this legislation, a marketplace is any physical or electronic place used to sell items for marketplace sellers, through which the marketplace facilitator lists a marketplace sellers items for sale through its marketplace; and processes sales or payments for marketplace sellers.  Each quarter, a marketplace facilitator must determine if it meets either threshold for the prior 12 month period.
  • Maine - Beginning October 1, 2019, HP 1064 provides that all marketplace providers are required to collect and remit tax on sales they facilitate if they have  more than $100,000 in annual gross sales into Maine; or at least 200 separate sales transactions in Maine.  For purposes of this legislation, a marketplace facilitator facilitates retail sales by listing, advertising, or processing orders for tangible personal property or taxable services for sale by marketplace sellers.  Marketplace sellers meeting these thresholds must also register.
  • New York – Retroactively applied back to June 1, 2019, SB 6615 increases the economic nexus threshold for marketplace providers from more than $300,000 to more than $500,000 in sales of tangible personal property delivered in New York.  The additional requirement of more than 100 sales of tangible personal property delivered in New York remains the same.  The measurement period remains the immediately preceding four sales tax quarters.

 

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 – AZ, MD, OK, MN

Economic Nexus Update – AZ, MD, OK, MN

6/5/2019 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-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
2 months 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

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.