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:
- 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.
- States Will Eliminate Notice and Reporting Requirements
- Kentucky - HB 354 eliminates the use tax notice requirements for remote sellers.
- 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