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:
- 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.
- 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.