Multistate: More State Reactions to Wayfair

States continue to issue guidance or statements since the recent U.S. Supreme Court decision in South Dakota v. Wayfair.

Podcast Transcript

Effective December 1, 2018, the Colorado Department of Revenue will adopt new sales and use tax rules providing that retailers with over $100,000 in receipts from sales in Colorado or 200 Colorado transactions in the previous or current calendar year are considered to have substantial nexus with the state  At the same time, it is adopting a rule mandating that all sellers collect local sales tax based on the tax rate at the point of delivery for any local and special district taxes administered by the state. Specifically, when a taxable good is delivered to a Colorado address, the seller must collect local sales tax based on the tax rate in the destination jurisdiction. Sales made at a seller’s place of business will continue to be subject to tax at the rate in effect for the seller’s business location. To comply with the new rules, sellers will need to add each applicable delivery point to their revenue online account and determine the applicable tax rate for each jurisdiction using form DR 1002. Lastly, although not included within the new rule, the Department plans to offer a grace period through March 31, 2019, to provide sellers with sufficient time to comply with the new local tax collection rules (but not the economic nexus standard). The new local tax collection rule applies only in localities and districts in which the state administers the local tax. The Department advises sellers to contact each home rule jurisdiction for collection requirements pertaining to sales into the jurisdiction.

The Utah Tax Commission issued guidance with regard to Senate Bill 2001, which imposes a sales and use tax collection and remittance obligation on remote sellers receiving gross revenue of more than $100,000 from the sale of tangible personal property, any product transferred electronically, or services for storage, use, or consumption in Utah, or that has 200 or more separate transactions from such sales. The standards set forth in Senate Bill 2001 become effective January 1, 2019. The guidance notes that for sales occurring on or after January 1, 2019, Senate Bill 2001 repeals the 18 percent collection discount offered to remote sellers that voluntarily collected and remitted sales tax.

On October 24, 2018, the California Department of Tax and Fee Administration (CDTFA) held a meeting to seek input from businesses and practitioners on what economic thresholds the state should apply to remote sellers. As previously reported, the CDTFA plans to issue notices requiring businesses that meet the to-be-determined thresholds to begin collecting and remitting sales tax by early 2019. While the exact thresholds have not yet been determined, the Director of the CDTFA indicated that the thresholds outlined in the South Dakota law are favorable. The Director further stated that existing law did not authorize the CDTFA to consider when adopting nexus thresholds, concerns such as California’s complex sales and use tax system, not being a member of the Streamlined Sales and Use Tax Agreement, and appropriate thresholds based upon California’s population. These issues, according to the Director, would be for the State Legislature to consider as they are more policy in nature.

The Director of the CDTFA noted the agency is not planning to delay implementation of economic nexus until the Legislature is back in session because it is “implementing legislative action from 2011, and there’s a statute on the books that [the CDTFA] feel[s] compelled to administer.” The statute referred to applies to retailers “with substantial nexus for purposes of the Commerce Clause of the U.S. Constitution.” See Cal. Rev. & Tax. Code § 6203(c). Lastly, CDTFA staff noted the thresholds to be established will also apply to the local “transaction and use taxes” adopted by a number of localities and special districts. According to CDTFA staff, remote sellers meeting the nexus threshold for sales into the state would have to collect and remit sales tax at the statewide “uniform sales tax rate” of 7.25 percent (divided among the state and local governments) and would also have to meet the same threshold for sales into any transaction and use tax district before being required to collect and remit that district transaction and use tax. District taxes are locally adopted levies in addition to the uniform rate and can range up to 1.0 percent.

On October 24, 2018 the Louisiana Sales and Use Tax Commission for Remote Sellers (Commission) held a meeting to discuss the appropriate definition of “remote seller.” The Commission had previously requested that the Louisiana Department of Revenue (Department) draft an Information Bulletin defining remote seller for purposes of the state’s economic nexus standard. Information Bulletin 18-XXX, currently in draft form, defines remote seller as “a seller who regularly sells for sale at retail, use, consumption, distribution, or for storage to be used for consumption or distribution any taxable tangible personal property, products transferred electronically, or services for delivery within Louisiana but does not have physical presence in Louisiana.” Notably, marketplace facilitators are specifically excluded from the definition of remote seller. According to the draft bulletin, remote sellers with cumulative annual gross receipts in excess of $50,000, including those gross receipts of its affiliates, per calendar year must comply with the state’s use tax reporting requirements. The draft bulletin notes that remote sellers with gross revenue from Louisiana sales in excess of $100,000, or that make 200 or more sales transactions into Louisiana, should voluntarily collect and remit sales tax on sales for delivery in Louisiana.  Sellers that do so will not have to comply with the use tax reporting requirements from the date it begins to collect. The draft information bulletin notes that collection will become mandatory in the future. Recall, in July 2018, Louisiana Secretary of Revenue Kim Robinson noted the Department has targeted January 1, 2019 for an update to its processing systems that would allow the Commission to serve as the single collector of state and local sales and use tax for remote sellers as required by Louisiana statute.

The Virginia Secretary of Finance last week told the tax press that the Northam Administration intends to pursue legislation in the 2019 legislature that would require remote sellers to collect tax on sales into the Commonwealth. The Secretary also indicated the legislation would be based on the South Dakota approach to economic nexus, but would likely include “some proportionality” for the size of the Virginia economy as well as a requirement for marketplace operators to collect tax on sales they facilitate.

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