Eight months after the U.S. Supreme Court’s landmark decision in South Dakota v. Wayfair, states continue to enact legislation and issue guidance in response to the decision. Interestingly, there seems to be little organized opposition in most states to legislation addressing the Wayfair decision. Below is a summary of recent Wayfair-related developments.
In Wyoming, Governor Gordon signed H.B. 69 that, effective July 1, 2019, requires marketplace facilitators exceeding the state’s economic nexus threshold of over $100,000 in gross revenue or 200 or more retail sale transactions to collect sales and use taxes on sales into the state. A marketplace facilitator exceeding either of these thresholds will be treated as a vendor for tax collection purposes and will be required to collect tax on all taxable sales it makes or facilitates on behalf of a marketplace seller. A marketplace facilitator is defined as “any person that facilitates a sale for a marketplace seller through a marketplace by: (1) offering for sale by a marketplace seller … [taxable] tangible personal property, admissions or services and (2) directly, or indirectly … collecting payment from a purchaser and transmitting the payment to the marketplace seller, regardless of whether the person receives compensation or other consideration in exchange for facilitating the sale or providing any other service.” House Bill 69 also relieves a marketplace facilitator of liability for failing to collect or remit sales tax as a result of incorrect or insufficient information provided by a marketplace seller, provided the relief granted does not exceed five percent of the total sales tax due from the marketplace facilitator. If such relief is granted, the liability shifts to either the marketplace seller or purchaser. However, no relief is granted if the marketplace seller is affiliated with the marketplace facilitator.
Lawmakers in three states, Florida (S.B. 1112), Kansas (H.B. 2352), and New Mexico (H.B. 579), have proposed legislation which, among other things, would establish a sales tax collection and remittance obligation on remote sellers and/or marketplace facilitators.
In Maryland (H.B. 13011 and S.B. 728), Georgia (H.B. 276), Kentucky (H.B. 354), Texas (S.B. 890 and H.B. 1525), and Utah (S.B. 168) proposed legislation would expand the state’s existing economic nexus thresholds and sales tax collection and remittance obligations to marketplace facilitators. Lawmakers in California amended Assembly Bill 147 to specifically define marketplace facilitator and to provide that a marketplace facilitator would be considered the seller and retailer for each sale facilitated through its marketplace. Assembly Bill 147 would also amend the definition of a retailer engaged in business in California to include retailers and marketplace facilitators that have a cumulative sales price from sales of tangible personal property for delivery into California that exceeds $500,000. If enacted, the provisions in Assembly Bill 147 applicable to marketplace facilitators would be effective October 1, 2019 and the provisions applicable to retailers would be effective April 1, 2019. Recall, applying existing California authorities, the California Department of Tax and Fee Administration is requiring remote sellers with over $100,000 of sales into California or 200 or more separate transactions into California to collect sales and use tax effective April 1, 2019.
In Tennessee, at least three proposed bills (H.B. 733, H.B. 1387, and S.B. 1457) would, among other things, impose collection obligations on remote sellers that meet an over $100,000 sales/200 transactions threshold. Tennessee currently has an economic nexus rule with a higher standard that is not enforceable absent legislative approval.
States have also continued to issue or revise guidance on existing sales and use tax collection obligations. The South Dakota Department of Revenue recently issued a “Marketplace Bulletin” outlining the obligations imposed on certain marketplace providers effective March 1, 2019 under the terms of legislation passed in a special legislative session in 2018. The Department also released information indicating that tax collections from remote sellers increased by over $1 million in each of the first two months since its economic nexus requirements took effect on November 1, 2018.
In a recent event with the D.C. Bar Association, a representative from the Comptroller of Maryland indicated that the comptroller’s office was taking a “wait-and-see approach” with regard to auditing remote sellers. The representative stated that this approach is partly due to the irregularity of filings and that it may be “too early to put out an all-out audit of companies that may not be registered.” The representative provided that there has been an increase in the number of remote sellers that have registered each month since its economic nexus regulations took effect on October 1, 2018. Specifically, it has found that about 2,300 remote sellers have registered with the state over a 3 month period. Finally, the representative indicated that the comptroller’s office plans to provide guidance based on various questions it has received from remote sellers and proposed legislation. Please stay tuned to TWIST for more Wayfair related developments.