Multistate: States continue to issue guidance on the Wayfair decision

Tax agencies and/or government representatives from California, Florida, Nebraska, New York, South Carolina and Tennessee, in general statements or in response to specific requests for statements from the tax press, have acknowledged the decision and noted that they are reviewing the decision to ascertain the impact.

Podcast Overview

It’s been another week, and states have continued to issue guidance or statements on the recent U.S. Supreme Court decision in South Dakota v. Wayfair. Tax agencies and/or government representatives from California, Florida, Nebraska, New York, South Carolina and Tennessee, in general statements or in response to specific requests for statements from the tax press, have acknowledged the decision and noted that they are reviewing the decision to ascertain the impact.

In Ohio, a representative from the Department of Taxation stated that the decision does not have an immediate, direct impact on Ohio because the Court ruled on the law of South Dakota, rather than Ohio’s. Under Ohio law, an out-of-state vendor that uses in state software to make sales or that has relationships with a content distribution networks in Ohio and has gross receipts in excess of $500,000 from sales of tangible personal property to Ohio customers is deemed to have nexus.

In Utah, a spokesperson from the Utah State Tax Commission noted that the Commission notified the State Legislature, as it is required to do so by law, of the Supreme Court’s decision in Wayfair authorizing states to collect sales tax from remote sellers. The Commission is now awaiting direction from the Legislature.

The Wisconsin Legislative Fiscal Bureau, in a memo to the Wisconsin legislature, noted that the statutory definition of a retailer effectively has been modified by the Wayfairdecision because the physical presence standard is no longer constitutionally required. Wisconsin defines "retailer engaged in business in this state" to include "any retailer selling tangible personal property, or items, property, or goods...or taxable services for storage, use, or other consumption in this state, unless otherwise limited by federal law." The memo notes, however, "unlike South Dakota, the Wisconsin statutes do not specifically provide for an electronic (sic) nexus threshold," and it is unclear that requiring out-of-state vendors to collect tax without changes to statutes or administrative code would comport with the Court’s ruling. The Wisconsin Department of Revenue subsequently issued guidance stating that beginning October 1, 2018, remote sellers will be required to collect and remit sales or use tax on sales of taxable products and services in Wisconsin. The DoR is developing a rule consistent with the Court’s decision in Wayfair with respect to small seller exceptions and other matters.

New Hampshire Governor Chris Sununu joined other New Hampshire leaders in developing the state’s response to Wayfair. At the next Governor and Council meeting on July 11, Governor Sununu plans to ask the Council to convene a special legislative session to consider legislation to “prevent other states from forcing [New Hampshire] businesses to collect sales and use taxes.” The Governor noted “live free or die is not just a slogan on a license plate. It is the very essence of who we are.” Some provisions of forthcoming legislation he intends to propose are:

  • “First, any out of state taxing authority seeking to audit or impose tax collection obligations on a New Hampshire business will be required to notify the New Hampshire Department of Justice.
  • Second, before proceeding, the out of state taxing authority will be required to receive a written determination, from the New Hampshire Department of Justice, that the authority's statutes provide certain protections and meet strict requirements.
  • Third, these protections and requirements will include a safe harbor for a certain amount of sales, a prohibition against retroactive enforcement, a safe harbor for small businesses, and other strict requirements. In addition, an out of state taxing authority will have to show that its laws will not impose an unconstitutional burden on New Hampshire businesses.
  • Fourth, the New Hampshire Department of Justice will be empowered to file an expedited suit to block any attempt to impose tax collection obligations undertaken in violation of this new law.”

The Alabama Department of Revenue issued guidance providing that the state’s existing “economic nexus” rule (810-6-2-.90.03), which took effect in January 2016, will be applied prospectively only for sales made on or after October 1, 2018. While this rule technically was effective January 1, 2016, its validity was in question pending the outcome of the Wayfair decision. Because Wayfair removed the constitutional impediments to the rule, it will be enforced going forward. Remote sellers with annual Alabama sales in excess of the rule’s $250,000 small seller exception should register for the Alabama Simplified Sellers Use Tax Program (SSUT) and begin collecting no later than October 1, 2018. The SSUT program requires a participating seller to collect a tax of 8 percent on all sales into the state and to remit all such collections to the DoR, rather than collecting and remitting in individual localities. In addition to the collection requirements for remote sellers, Alabama law requires marketplace facilitators with Alabama marketplace sales in excess of $250,000 to collect tax on sales made by or on behalf of its third-party sellers or to comply with use tax reporting and customer notification requirements. Marketplace facilitators must start collecting or complying with the reporting requirements on or before January 1, 2019. The marketplace facilitator can choose to begin collecting under the SSUT beginning in October 2018, and if a remote seller can demonstrate that a marketplace facilitator is collecting and remitting on its behalf, the seller is relieved of the collection obligation.

Finally, Senators Tester (D-MT), Shaheen (D-NH), Merkley (D-OR), and Hassan (D-NH), all of which represent constituents in states that do not impose a sales or use tax, introduced federal legislation (Senate Bill 3180) titled “A bill to regulate certain State impositions on interstate commerce” in an effort to overturn the U.S. Supreme Court’s decision in Wayfair. Text of the proposed bill is not yet available. Please stay tuned to TWIST for additional post-Wayfair updates.

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