Another week has gone by and more states have issued guidance in light of the U.S. Supreme Court decision in South Dakota v. Wayfair. On September 11, 2018, the Colorado Department of Revenue issued an emergency regulation, effective December 1, 2018, that requires remote sellers, meeting the state’s economic nexus threshold of over $100,000 of Colorado sales or 200 or more separate transactions for delivery into Colorado, to collect Colorado sales and use tax on sales made to Colorado purchasers. The Department noted that the requirement will be applied prospectively only. Colorado also has provisions requiring non-collecting retailers to file certain use tax reports. While those provisions remain in Colorado law, a remote seller meeting the economic nexus threshold under the emergency rule would likely be considered a nexus retailer and would not be able to avoid collection by filing the use tax reports. The Department also noted that any questions regarding home rule cities should be addressed directly with the city.
On September 11, 2018, the Illinois Department of Revenue issued an emergency regulation requiring remote sellers having $100,000 or more in gross receipts in Illinois from the sale of tangible personal property or 200 or more separate transactions for the sale of tangible personal property to purchasers in Illinois, to register with the Department to collect and remit use tax. This rule becomes effective October 1, 2018. The remote seller must determine, on a quarterly basis on the last day of March, June, September, and December, whether either threshold has been met or exceeded for the preceding 12-month period (i.e., the test period). If the retailer has met or exceeded either threshold during the test period, then the retailer has nexus and a collection requirement with Illinois for the following year. The following sales are excluded for purposes of establishing whether either threshold has been met or exceeded: sales for resale, sales of tangible personal property that are required to be registered with a state agency (e.g., motor vehicles), occasional sales, and sales subject to the Retailer’s Occupation Tax. The emergency regulation is effective for a maximum of 150 days, during which time, the DoR, presumably, will undertake a permanent rule-making process.
A spokesperson for the California Department of Finance, the agency that drafted proposed legislation requiring remote sellers making $500,000 or more in retail sales into the state to collect sales and use tax, informed the tax press that the proposed legislation died with the state’s legislative session that ended on August 31, 2018. The draft legislation would have also required marketplace facilitators to collect sales and use tax on sales by marketplace sellers if the marketplace’s total sales into California exceeded the $500,000 threshold. The California Department of Tax and Fee Administration (Department) nonetheless indicated that it intends to issue regulatory guidance regarding Wayfair “in the near future.”
On September 12, 2018, South Dakota Governor Daugaard signed Senate Bill 1, a measure that removes an injunction preventing South Dakota from enforcing its sales tax economic nexus law for all taxpayers except the named litigants in the ongoing lawsuit, South Dakota v. Wayfair, Inc. Under Senate Bill 1, South Dakota's economic nexus law, which applies to remote sellers making over $100,000 in South Dakota sales or 200 or more separate transactions for delivery into South Dakota, becomes effective November 1, 2018. The governor also signed Senate Bill 2 which imposes a collection obligation on certain marketplaces effective March 1, 2019.
The Texas Comptroller’s office has developed a proposed regulation to implement the Wayfair decision and released it to two advisory committees for comment and feedback. The proposed regulation amends the definition of “engaged in business” to include the systematic solicitation of sales through various types of communication systems for the purpose of effecting sales of taxable items. The proposed regulation also creates a safe harbor for remote sellers whose total revenue, defined to mean gross revenue from the sale of tangible personal property and services for storage, use, or other consumption in the state, in the preceding twelve calendar months is less than $500,000. A remote seller meeting the threshold must begin collecting Texas sales and use tax not later than the first day of the fourth month after the month in which a remote seller exceeds the safe harbor. Under the proposed regulation, July 1, 2018 – June 30, 2019 is the initial twelve calendar months for determining whether a remote seller qualifies for the safe harbor. If a remote seller’s gross revenues exceed $500,000 during this period, the remote seller must obtain a permit and begin collecting sales and use taxes no later than October 1, 2019. A remote seller may terminate collection if its gross revenue for twelve consecutive months is below the $500,000 safe harbor. Once feedback is received from the advisory committees, a formal regulation will be proposed which will initiate an additional 30-day comment period.
The Wisconsin Department of Revenue also issued an emergency regulation to repeal and replace Wisconsin Administrative Code section Tax 11.97. The emergency regulation, effective October 1, 2018, provides that an out-of-state retailer having more than $100,000 in annual gross sales (taxable and non-taxable) into Wisconsin or 200 or more separate sales transactions into Wisconsin, in the previous or current year, has an obligation to collect tax on sales into Wisconsin. If the seller exceeds the threshold in the previous year (meaning the taxable year of the taxpayer), it is required to collect for the entirety of the succeeding year. If the seller exceeds the threshold in the current year (but not the prior year), it is required to collect tax on all sales in the remainder of the current year and all of the succeeding year.
On September 13, 2018, the Nevada Tax Commission approved a regulation to adopt economic nexus for sales and use tax purposes with thresholds to mimic South Dakota's law (more than $100,000 in sales or 200 or more separate transactions for delivery into the state in the current or preceding calendar year). Under the regulation, a remote seller is required to register with the Nevada Department of Taxation beginning on, and no later than, the first day of the first calendar month that begins at least 30 days after the retailer meets or exceeds the thresholds. The regulation now awaits a legislative commission’s final approval.
Finally, there was some activity on Capitol Hill related to the Wayfair decision. On September 6, 2018, Congressman Bob Gibbs (R-Ohio) filed “Protecting Businesses from Burdensome Compliance Cost Act of 2018.” This bill, if enacted, would “limit the authority of a State to require remote sellers to collect taxes and fees owed by purchasers then located in such State incident to their purchases of goods and services from such sellers, and for other purposes.” The bill would not allow a state to require a remote seller to collect and remit until after the January 1, 2019 effective date of the Act. It would also require that the state impose a uniform rate that does not exceed the highest combined state and local rate applied in the state, and would prohibit subdivisions of states from requiring collection by remote sellers. Please stay tuned to TWIST for future Wayfair-related updates.