Another week has passed and states continue to issue guidance or statements addressing the recent U.S. Supreme Court decision in South Dakota v. Wayfair.
On August 14, 2018, the New Jersey Division of Taxation announced that effective October 1, 2018, remote sellers meeting South Dakota- style thresholds (over $100,000 of gross revenue from the sale of tangible personal property, specified digital property, or services into New Jersey or 200 or more separate transactions for delivery into New Jersey in the prior or current calendar year) must register, collect, and remit New Jersey sales tax. Recall, after the Wayfair decision was released, New Jersey lawmakers passed sales and use tax economic nexus legislation. However, at this point, Governor Murphy has not acted to sign the bill (Assembly Bill 4261).
On August 10, 2018, the South Carolina Department of Revenue released three draft revenue rulings addressing the Wayfair decision and how it applies to remote sellers, online marketplaces, and sellers that are using online marketplaces. Members of the public can make comments on the drafts through August 27, 2018. In all three draft rulings, the Department makes clear that it views marketplaces as the retailer of all tangible personal property sold on the marketplace’s website. This is consistent with litigation the Department has initiated in which it is arguing that marketplaces are the equivalent of consignment sales, and as the consignee, the marketplace is the retailer of the item sold.
In the first draft Revenue Ruling #18, the Department addresses the sales and use tax collection obligations of remote sellers (retailers without a physical presence in S.C.). Remote sellers with gross proceeds (all taxable retail sales, exempt retail sales, and wholesale sales) from sales of tangible personal property into South Carolina exceeding $250,000 in the previous or current calendar year are considered to have established an economic presence in South Carolina and will have an obligation to collect and remit tax effective October 1, 2018. The $250,000 threshold includes all sales made by the remote seller, including of tangible personal property owned by another person. It does not, however, include tangible personal property owned by the remote seller, but sold by another person. A remote seller meeting the threshold on or after September 1, 2018, (or during the current calendar year in 2019 and beyond) is responsible for remitting the sales and use tax for all taxable sales made into South Carolina beginning the first day of the second calendar month after economic nexus is established.
In the second draft Revenue Ruling #18, the Department addresses the sales and use tax collection obligations of an online marketplace which is defined generally as a person in the business of facilitating retail sales of tangible personal property by (a) listing or advertising the products of others on the marketplace and (b) directly or indirectly through a third party, collecting or processing payments from the purchaser. Effective October 1, 2018, an online marketplace without a physical presence in South Carolina, but having over $250,000 of gross proceeds from the sale of tangible personal property, including sales of property owned by the marketplace, and sales of property owned by others but facilitated by the marketplace will have an obligation to collect and remit tax on all sales delivered into South Carolina. Online marketplaces meeting the threshold on or after September 1, 2018, are responsible for remitting the sales and use tax for all taxable sales, including taxable sales of tangible personal property owned by another person but sold via the online marketplace, made into South Carolina beginning the first day of the second calendar month after economic nexus is established.
In the third draft Revenue Ruling #18, the Department addresses marketplace sellers (i.e., retailers selling their property via an online marketplace operated by another). The draft ruling notes that the Department is currently in litigation with a large online marketplace regarding what it considers is the obligation of the marketplace to collect on all sales it facilitates. It further notes, however that marketplace sellers may voluntarily obtain a sales tax license to collect and remit until the litigation is resolved, stating that allowing such voluntary collection is designed to “allow such persons (i.e., marketplace sellers) to take action that should prevent them from incurring a large sales and use tax liability for sales made via the online marketplace if the courts ultimately rule against the Department and in favor of [the online marketplace].” Finally, the Department notes that if the marketplace seller has a physical presence in the state or meets the economic nexus threshold for a remote seller on its volume of sales other than through a marketplace, it would be responsible for collection of tax on those sales. Please stay tuned to TWIST for future Wayfair updates.