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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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Blog: Dillon Tax Consulting

nexus

2022 – the Year of the Sales Tax Audit

Michael T. Dillon, Esq., Dillon Tax Consulting LLC
12/8/2021

2022 is expected to bring heightened enforcement and increased sales tax audit activity for remote sellers.  Charles Maniace, a vice president at the tax software firm Sovos, states that “States are now truly ready to [start] being fairly aggressive in their enforcement against existing online sellers.”  [Forbes, Sales Taxes in 2022 – Issues to Watch for Online Retailers, by Liz Farmer (November 30, 2021)]

read more

2021 Sales Tax Highlights and Advice for 2022

11/12/2021

As 2021 comes to an end, lets recap a few important sales tax changes and offer insight into what taxpayers can expect for 2022:

  • Economic Nexus – As of July 2021, two states, Florida and Kansas, have sales tax economic nexus. While both measures impose a safe harbor threshold of $100,000 in annual sales, below which remote sellers do not have to register to collect sales tax, the measures have distinct measurement criteria for determining whether a remote seller has sales tax nexus.  You can learn more about both measures in the linked Economic Nexus chart on our website.
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City of Chicago Economic Nexus “Safe Harbor”, effective July 1, 2021

Michael T. Dillon, Esq.
1/26/2021

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-four (44) states (all except Florida and Missouri) have adopted economic nexus provisions for sales tax compliance purposes.  Even the Alaskan local jurisdictions have gotten in on the action, adopting an intergovernmental agreement to establish a Commission that will provide governance over a streamlined, single-level administration of sales tax collection and remittance. 

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

7/2/2019

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 ...
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Economic Nexus Update – AZ, MD, OK, MN

6/5/2019

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 ...

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

4/19/2019

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

by Michael T. Dillon, Esq., Dillon Tax Consulting LLC
3/26/2019

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:

read more

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

Michael T. Dillon, Esq., Dillon Tax Consulting LLC
6/22/2018

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 ...

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

Michael T. Dillon, Esq., Dillon Tax Consulting LLC
3/24/2018

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. 

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

Michael T. Dillon, Esq., Dillon Tax Consulting LLC
3/7/2018

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?

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MTC Amnesty Program Provides Current Solution for Online Sellers Seeking to Resolve Sales Tax Compliance Nightmares

Michael T. Dillon, Esq., Dillon Tax Consulting LLC
9/7/2017

If you’re an online seller using the Amazon FBA program to facilitate sales, there’s a lot to absorb and consider these days regarding sales tax compliance.  Depending on who you talk to, you may get different advice:

  1. Some attorneys, hungry to fight the legal issues in court (a highly costly endeavor with no guarantees), will advise that if your only activity in the state is inventory in an Amazon warehouse, you do not have to comply with that state’s sales tax laws ... that your inventory in an Amazon warehouse does not establish nexus in that state for ...
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MTC Announces Voluntary Amnesty Initiative for Online Marketplace Sellers

Michael T. Dillon, Esq., Dillon Tax Consulting LLC
8/11/2017

The Multistate Tax Commission (MTC) has just announced a special tax amnesty program for unregistered online marketplace sellers that have established nexus and historical exposure as a result of storing inventory in third-party fulfillment centers that facilitate retail sales into the state (e.g., Amazon FBA program).  Under the program, eligible taxpayers may obtain amnesty from any past due sales/use tax, and if applicable, income/franchise tax liability, including interest and penalties, in connection with online retail sales activity in the participating states. 

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Does the Sales Tax Nexus “Physical Presence” Standard Exist?

Michael T. Dillon, Esq., Dillon Tax Consulting LLC
2/22/2017

U.S. Supreme Court Declines to Review Florida Sales Tax Imposed on Out of State Inventory Delivered to Out of State Customers

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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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“What’s A Remote Seller To Do?” you ask. “Register and Collect,” states say.

by Michael T. Dillon Esq., Dillon Tax Consulting LLC
7/29/2015

Ohio is the most recent of states to have enacted a click-through nexus provision.  To date, 24 other states have adopted (by statute or otherwise) some form of either an affiliate nexus or a click-through nexus provision.

Under an affiliate nexus provision, a rebuttable presumption of nexus is typically established for an out-of-state seller that has an in-state affiliate selling similar products, storing inventory, or engaging in other activities that potentially assist the out-of-state entity in building or maintaining a marketplace in the state.  Under a click-through nexus provision, a rebuttable presumption of nexus is established for an out-of-state seller ...

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The Quill ‘Physical Presence’ Standard – A “Perfect Storm” Brewing

by Michael T. Dillon, Esq., Dillon Tax Consulting LLC
3/15/2015

Ever since, and even before, the U.S. Supreme Court’s landmark 1992 decision in Quill Corp. v. North Dakota, in which it affirmed the Commerce Clause ‘physical presence’ standard for sales tax nexus, Congress has continually grappled with the increasing sales tax revenue shortfalls and perceived unfair advantage that online and mail-order retailers have over brick and mortar retailers.  The ‘physical presence’ standard affirmed in Quill currently bars states from imposing sales tax compliance obligations on out-of-state retailers who lack a ‘physical presence’ with the state. 

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Try, Try Again ... Illinois Imposes a New and “Improved?” Affiliate Nexus Law

Michael T. Dillon, Dillon Tax Consulting LLC
2/10/2015

Effective January 1, 2015, out-of-state retailers are once again presumed to have sales tax nexus in Illinois if they satisfy the following criteria:

  • the out-of-state retailer has a contract with a person in Illinois;
  • under the contract, the person in Illinois refers potential customers to the retailer and the retailer pays to the person in Illinois a commission or other consideration based on the sale of tangible personal property by the retailer;
  • the person in Illinois provides to the potential customers a promotional code or other mechanism that allows the retailer to trace the purchases made by these customers;
  • the ...
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Recent Blog Articles

Recent Blog Articles

2022 – the Year of the Sales Tax Audit

2022 – the Year of the Sales Tax Audit

12/8/2021 12:00:00 AM EST
6 months ago

2022 is expected to bring heightened enforcement and increased sales tax audit activity for remote sellers.  Charles Maniace, a vice president at the tax software firm Sovos, states that “States are now truly ready to [start] being fairly aggressive in their enforcement against existing online sellers.”  [Forbes, Sales Taxes in 2022 – Issues to Watch for Online Retailers, by Liz Farmer (November 30, 2021)]

2021 Sales Tax Highlights and Advice for 2022

2021 Sales Tax Highlights and Advice for 2022

11/12/2021 12:00:00 AM EST
7 months ago

As 2021 comes to an end, lets recap a few important sales tax changes and offer insight into what taxpayers can expect for 2022:

  • Economic Nexus – As of July 2021, two states, Florida and Kansas, have sales tax economic nexus. While both measures impose a safe harbor threshold of $100,000 in annual sales, below which remote sellers do not have to register to collect sales tax, the measures have distinct measurement criteria for determining whether a remote seller has sales tax nexus.  You can learn more about both measures in the linked Economic Nexus chart on our website.

State Economic Nexus Standards

State Economic Nexus Standards

7/4/2021 12:00:00 AM EDT
12 months ago

State Economic Nexus Standards - UPDATED AS OF 4/1/22

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.  

 

State Marketplace Facilitator Compliance Standards - UPDATED AS OF 4/1/22

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, all states have chosen to impose sales tax compliance obligations on marketplace providers or facilitators. Attached as an informational reference tool is a listing of the states that have adopted some form of a marketplace facilitator nexud and compliance 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.

 

WHAT YOU MUST KNOW

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. 

Maryland imposes sales and use tax on the sale of software and digital products

Maryland imposes sales and use tax on the sale of software and digital products

3/9/2021 12:00:00 AM EST
1 years ago

Maryland will begin imposing sales tax on the sale of digital products, starting March 14, 2021.  This is an abrupt change in tax policy for a state that has historically steered away from imposing sales tax on electronically delivered and remotely accessible software, digital products, and cloud-based data and information services.  These changes may be found primarily in Maryland Tax Code Sections 11-101(h) and 11-101(n).

The Comptroller’s office has published guidance on HB 932 21st Century Fairness Act which imposes sales and use tax on the sale of digital products.  The guidance can be found here:

 

City of Chicago Economic Nexus “Safe Harbor”, effective July 1, 2021

City of Chicago Economic Nexus “Safe Harbor”, effective July 1, 2021

1/26/2021 12:00:00 AM EST
1 years 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-four (44) states (all except Florida and Missouri) have adopted economic nexus provisions for sales tax compliance purposes.  Even the Alaskan local jurisdictions have gotten in on the action, adopting an intergovernmental agreement to establish a Commission that will provide governance over a streamlined, single-level administration of sales tax collection and remittance. 

Economic Nexus Update: July 8, 2020 – TN, LA, IL

Economic Nexus Update: July 8, 2020 – TN, LA, IL

7/8/2020 12:00:00 AM EDT
1 years 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-four (44) states have adopted economic nexus provisions for sales tax compliance purposes.  The biggest trends right now continue to be that states are revising their thresholds and also adopting marketplace nexus provisions.

Recently enacted Tennessee and Louisiana legislation imposes compliance obligations on marketplace facilitators.  In addition, recent Tennessee legislation reduces the economic nexus threshold for remote sellers and remote marketplace facilitators, while Louisiana and Illinois have changed or reiterated the compliance obligations impacting remote sellers and marketplace facilitators in these states. 

Where States Will Turn for Revenue in Response to Declining Sales Tax Collections?

Where States Will Turn for Revenue in Response to Declining Sales Tax Collections?

5/27/2020 12:00:00 AM EDT
2 years ago

The Current State of Things

As I predicted in my March 25th post, Sales Tax Strategies During the Economic Disruption of the COVID-19 Outbreak, every state is revising its FY 2020 revenue forecasts in response to declining tax collections for March and April.  [https://www.ncsl.org/research/fiscal-policy/coronavirus-covid-19-state-budget-updates-and-revenue-projections637208306.aspx]  As reported by the National Conference for State Legislatures, some examples of these shortfalls include:

  • FloridaOffice of Economic & Demographic Research reported sales tax collection came in $12.4 million or .58% below monthly estimates. 
  • Illinois: Current fiscal year general fund revenues were revised to $2.7 billion below February estimates of $36.9 billion by the Governor's Office of Management and Budget (GOMB).
  • Maryland: Comptroller Peter Franchot and the Bureau of Revenue Estimates outlined a shortfall of approximately $2.8 billion during the final quarter of FY 2020. The economic shutdown could also result in a loss of 59% of all sales tax revenue in a month, or almost $250 million.  
  • New York: In a letter to Governor Andrew Cuomo (D), State Comptroller Thomas DiNapoli estimated tax revenue would be between $4 billon and $7 billion below projections for fiscal year 2020. New York’s fiscal year ended on March 31. 
  • Pennsylvania: According to the Independent Fiscal Office (IFO), April revenue collections were down by $2.16 billion, or 49.8% less than projections released in August 2019. Sales and use tax collections fell short of estimates by $357.3, or 35.9%.
  • Texas: Texas Comptroller Glenn Hegar reported April state sales tax revenue dropped by 9.3% from April 2019, the state's steepest decline since January 2010. Sales tax revenue accounts for 57% of all tax collections in Texas.

Sales Tax Strategies During the Economic Disruption of the COVID-19 Outbreak

Sales Tax Strategies During the Economic Disruption of the COVID-19 Outbreak

3/25/2020 12:00:00 AM EDT
2 years ago

As we all hunker down or at least change our daily routines to include working from home and social distancing amidst the COVID-19 outbreak, the economy struggles to adapt to the acute and devastating change in business and consumer spending.  While the U.S. and global economy is dynamic and will undoubtedly adapt and recover from the impact, for purposes of this discussion, we reference the impact that recessions have on state tax revenue collections and what states have done to address reduced tax revenue.  We then consider the proactive measures companies should be taking now to enhance sales tax compliance processes and minimize risk and liabilities.