Multistate: Wayfair-related developments

The 2019 legislative sessions have or are about to kick off, and several state legislatures have begun to consider a response to the Wayfair decision.  In Texas, a bill has been drafted that would amend the definition of a “seller” and “retailer” to include marketplace providers. Under the draft bill, effective October 1, 2019, marketplace providers would be obligated to collect and remit sales tax and provide “collection certificates” to marketplace sellers certifying that the marketplace provider will assume the rights and duties of the seller with regard to sales made through the marketplace. All sales made by a marketplace provider would be sourced using destination-based sourcing.

In Virginia House Bill 1722 and Senate Bill 1083 would impose a collection and remittance obligation on remote sellers and marketplace facilitators with gross revenue exceeding $100,000 or at least 200 separate sales transactions in Virginia in the current or preceding calendar year.  In Missouri, three bills (House Bill 41, Senate Bill 46, and Senate Bill 50), have been introduced that would require remote sellers and/or marketplace facilitators to collect tax based on an economic nexus threshold of $100,000 or more in gross revenue from sales, or 200 or more transactions into Missouri in the current or preceding calendar year. Senate Bill 50 would also establish a simplified remote sales tax program in which sellers meeting the economic nexus threshold but having no physical presence in Missouri could collect a 6.5 percent tax on all sales into the state in lieu of collecting individual local taxes.  Lastly, in South Carolina, Senate Bill 214 would impose a sales tax collection and remittance obligation on marketplace facilitators and remote sellers that “meet constitutional standards for economic nexus.” Recall, effective November 1, 2018, the South Carolina Department of Revenue issued economic nexus guidance that imposes a sales tax collection and remittance obligation on remote sellers that have gross revenue from sales of tangible personal property, products transferred electronically, and services delivered into South Carolina exceeding $100,000. In the guidance, remote seller is defined such that it also includes marketplace facilitators meeting the economic nexus requirements.

On January 9, 2019, Representative Bob Gibbs (R. OH) introduced a federal bill to limit the ability of states to impose a sales tax collection and remittance obligation upon remote sellers. The bill, Protecting Business from Burdensome Compliance Cost Act of 2019, is nearly identical to H.R. 6724, Protecting Businesses from Burdensome Compliance Cost Act of 2018, which was introduced in the 115^th Congress and did not advance. If enacted the bill would prohibit states from requiring non-physical presence sellers to collect and remit until after the effective date of the Act, January 1, 2020. The bill would also require states to make certain simplifications for remote sellers.

On January 8, 2019, the Pennsylvania Department of Revenue issued Sales and Use Tax Bulletin 2019-01, which revises the Commonwealth’s current “collect or report” provisions. Under legislation enacted in October 2017, a remote seller or marketplace facilitator with more than $10,000 in taxable sales into Pennsylvania must elect to (1) register, collect, and remit sales tax or (2) comply with use tax notice and reporting requirements. Under the newly issued bulletin, effective July 1, 2019, the Department will require sellers with gross sales exceeding $100,000 into the Commonwealth in the prior 12 months to begin collecting and remitting sales tax. The economic nexus threshold also applies to marketplace facilitators with no physical presence in the Commonwealth. For purposes of determining whether the sales threshold is met, marketplace facilitators must aggregate facilitated and direct sales. Marketplace sellers with no physical presence in the Commonwealth evaluate whether they meet the threshold based on direct sales into the Commonwealth and those sales on which a marketplace facilitator did not collect sales tax on its behalf. The bulletin also provides that the Department will certify service providers that will offer software and perform services for sellers.  Vendors relying on the certified service providers for determining the taxability of a product and for registering, collecting, reporting and remitting sales tax will be relieved of liability upon audit.

The bulletin specifies that remote sellers and marketplace facilitators exceeding the more than $100,000 of gross sales economic nexus threshold will no longer be able elect to collect or report. However, the election option is still applicable to remote sellers and marketplace facilitators that have over $10,000 in taxable sales into the Commonwealth. Please stay tuned to TWIST for future Wayfair-related updates.