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:
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 ...
read moreAs 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.
read moreAs 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 ...
read moreSince 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 moreAs 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 ...
read moreIn 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.
read moreThe 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?
read moreWith New Years Day comes New Years Resolutions, some of which we keep, some of which we don’t, and some of which we fail to make because we aren’t even aware that one is needed. The same holds true for your business. Often times, “We Don’t Know What We Don’t Know”. It’s my calling to educate companies about this, with regard to multistate sales tax, nexus and ways to minimize audit risk for your company. Because with this New Year, state auditors are looking for your company as you read this.
read moreIn 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 ...
read moreAs we predicted at the beginning of last year, 2022 brought heightened enforcement and increased sales tax audit activity for remote sellers and all sellers. Heading into 2022, sales tax experts, this author included, were predicting that states were 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)]. Not only did Dillon Tax Consulting represent taxpayers in more sales tax audits than in any prior 30 years of my experience in multistate sales tax, but the states were far more aggressive in their pursuit of additional revenues than in previous experiences. So what are some of the reasons for this, and why do we predict that it will continue in 2023?
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)]
As 2021 comes to an end, lets recap a few important sales tax changes and offer insight into what taxpayers can expect for 2022:
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 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:
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.
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.
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: