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:
Economic Nexus Update – GA, NE, ND, NY, OK, TN, WA
- States Will Eliminate the Transaction Count
- Washington State - Substitute Senate Bill 5581 immediately eliminates the 200 transaction count threshold. Remote sellers will use $100,000 in sales to Washington as the primary threshold for collecting.
- North Dakota – SB 2191 eliminates the 200 transaction count threshold for periods after December 31, 2018. Remote sellers will use $100,000 in sales to North Dakota as the primary threshold for collecting.
- Oklahoma – several measures in the Oklahoma legislature would require remote sellers to use $100,000 in sales to Oklahoma as the primary threshold for collecting, with no transaction count threshold.
- States Will Lower Their Thresholds
- Georgia – HB 182, introduces legislation to lower the monetary economic nexus threshold from $250,000 to $100,000 on January 1, 2020, and leave the 200-transaction threshold unchanged.
- Washington State - Substitute Senate Bill 5581 lowers the economic nexus threshold for the Business & Occupation (B&O) tax to $100,000, effective January 1, 2020.
- States Will Eliminate Notice and Reporting Requirements
- Washington State - Substitute Senate Bill 5581 eliminates the notice and reporting requirements established in the Marketplace Fairness Act, effectively July 1, 2019. Recall that these requirements kick in once a remote sellers sales into Washington exceed $10,000.
- Oklahoma – several measures in the Oklahoma legislature would eliminate the notice and reporting requirements.
- Georgia – HB 182, introduces legislation to eliminate notice and reporting requirements for remote sellers who do not exceed the threshold.
- States Will Adopt Marketplace Nexus Provisions
- Nebraska – LB 284, which becomes enforceable on April 1, 2019, includes marketplace facilitators in the definition of “retailer” subject to the state’s current economic nexus standards (> $100,000 in annual sales or 200 annual transactions), which are codified under the same legislation. To the extent nexus exists, the marketplace facilitator is required to collect and remit sales tax on behalf of remote sellers making sales on the platform.
- Tennessee – in Opinion No. 19-03, the Tennessee Tax Commmissioner expressly approves the authority of Department of Revenue to promulgate rules requiring Online Marketplace Facilitators to collect sales tax.
- New York – the Commissioner made official its position regarding marketplace facilitators, by ruling that a taxpayer that operates an online marketplace may be treated as a co-vendor with regard to all taxable sales it facilitates on its marketplace on behalf of independent software vendors (ISVs) if: the taxpayer has sufficient nexus with New York; and the ISVs themselves qualify as vendors. The Commissioner ruled that the marketplace provider assumes a “co-vendor” status and would be jointly liable with the ISVs to collect sales tax and must assume all the responsibilities of a vendor. Those ISV vendors that make sales only in the taxpayer’s marketplace are relieved of the need to register to collect tax and file returns, as long as the taxpayer is complying with its duties as a vendor. In addition, the ISV would not be liable for tax as long as the taxpayer, as vendor, properly collected and remitted tax due on the ISV’s sales. [TSB-A-19(1)S, New York Commissioner of Taxation and Finance, March 7, 2019]
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.