States continue to issue guidance or statements regarding their intentions in response to the recent U.S. Supreme Court decision in South Dakota v. Wayfair. Tax agencies and/or government representatives from Indiana, Louisiana, Montana, New Hampshire, Rhode Island, South Carolina, Texas, and Wyoming, both 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. Importantly, on July 10, 2018, the Hawaii Department of Taxation amended announcement 2018-10 to provide that it would not enforce the state’s economic nexus provisions retroactively to all “taxable years beginning after December 31, 2017.” In its amended guidance, the Department announced that “to avoid any constitutional concerns, the Department will not retroactively administer the economic nexus statutes. Accordingly, taxpayers who lacked physical presence in Hawaii prior to July 1, 2018, but who met the $100,000 or 200-transaction threshold in 2017 or 2018, will not be required to remit general excise tax for the period from January 1, 2018 to June 30, 2018. However, taxpayers that meet these standards will be subject to general excise tax beginning on July 1, 2018 (or on the first day of the tax year beginning on or after July 1, 2018 if the taxpayer is a fiscal year taxpayer) and must file its first periodic return by statutory deadline for that period.
The Indiana Department of Revenue explained it is “currently prohibited from enforcing the obligation to collect sales tax from remote sellers until a declaratory judgment action currently pending in Indiana is resolved. Moreover, remote sellers are not obligated to register or collect Indiana sales tax until the declaratory judgment is resolved.” The Indiana economic nexus law is quite similar to South Dakota’s law. In a Frequently Asked Question document, the Department stated it will not seek retroactive enforcement of its economic nexus statute and will provide a specific date for enforcement as soon as it is known.
Louisiana Secretary of Revenue Kim Robinson, in a statement to the tax press, noted the Department of Revenue has targeted January 1, 2019 for an update to its processing systems that would allow the Louisiana Sales and Use Tax Commission for Remote Sellers (created under Louisiana House Bill 17), to serve as the single collector of state and local sales and use tax for remote sellers. The Department will “be issuing further guidance from the commission on next steps for remote dealers to comply with Louisiana law going forward.” In addition, the Louisiana Sales and Use Tax Commission for Remote Sellers will engage in discussions about becoming compliant with the Streamlined Sales and Use Tax Agreement without adopting the Agreement and to determine whether legislation is needed.
The Montana Department of Revenue issued a statement noting that Montana residents, following the decision in Wayfair, do not owe use tax on purchases delivered into Montana. However, Montana remote sellers making sales into other states may be required to collect and remit depending on the respective state’s laws.
The New Hampshire Executive Council has approved Governor Chris Sununu’s request for a special legislation session to address the consequences for New Hampshire remote sellers from Wayfair. The New Hampshire legislature will convene on July 25 to consider legislation to “prevent other states from forcing [New Hampshire] businesses to collect sales and use taxes.” In earlier statements, the Governor had called for placing strict requirements on other states seeking to audit New Hampshire sellers.
The Rhode Island Division of Taxation updated its webpage dedicated to non-collecting retailers, referrers, and retail sales facilitators to include a frequently asked questions document. The document confirms taxpayers still have the option to comply with the state’s use tax notice and reporting requirements instead of registering to collect and remit sales and use taxes following Wayfair.
The South Carolina Department of Revenue, in a letter to the General Assembly, explained that existing South Carolina law authorizes the Department to require remote sellers to collect and remit South Carolina sales and use tax without further legislative action following the Wayfair decision. The Department indicated it is drafting guidance, to be finalized in the upcoming weeks, for remote sellers regarding registration, collection, filing, and remitting sales and use tax on a prospective basis. The Department's guidance will apply the thresholds similar to the South Dakota law at issue in South Dakota v. Wayfair (over $100,000 of in-state sales or 200 or more separate transactions for delivery into the state).
The Texas Comptroller's office issued a memorandum advising the state legislature of the desirability of updating certain statutes following Wayfair. The Comptroller suggests the legislature consider amending the definition of "seller” and “retailer” to include marketplace platforms used by third-party sellers and provide adequate liability protection for the marketplaces that collect and remit for those sellers. The Comptroller also suggests the legislature amend existing law, which currently only applies to a change in collection responsibilities based on the passage of federal legislation, as opposed to court decision, to allow remote sellers to pay a fee based on a state-wide weighted average local sales and use tax rate in lieu of collecting actual local tax rates. Lastly, the Comptroller suggests the legislature amend existing law to ensure remote sellers are obligated to collect taxable services as well as just tangible personal property. The Comptroller’s office also notes that it is “reviewing agency rules that need amending to, for example, explain the amount of economic nexus in sales and/or transactions required to create a safe harbor for small sellers and intends to adopt these news rules by early 2019,” will not apply the new law retroactively, and will provide remote sellers with “ample time” to comply.
The Wyoming Department of Revenue, in a statement, notes that the Department is targeting October 1, 2018 as the enforcement date for remote sellers to be licensed to collect and remit sales and use tax.
Please stay tuned to TWIST for more post-Wayfair reactions and guidance.