State lawmakers continue to advance legislation addressing remote sellers and marketplace facilitators and many of these proposals are pending signature, or have recently been signed into law. Comprehensive tax legislation enacted in Kentucky (H.B. 354) includes provisions requiring certain marketplaces to collect and remit sales tax (see this Tax News Flash for additional information). On March 26, 2019, Virginia Governor Northam signed H.B. 1722 and S.B. 1083 establishing a sales tax collection and remittance obligation on remote sellers and marketplace facilitators.
Also on March 26, 2019, North Dakota Governor Burgum signed S.B. 2338 imposing a sales tax collection and remittance obligation on marketplace facilitators if, in the prior or current calendar year, the marketplace facilitator has sales of tangible personal property or other products or services exceeding $100,000. The bill defines a marketplace facilitator broadly, but specifically excludes payment processors appointed by a merchant to handle payment transactions from various channels, such as credit cards and debit cards, and whose “sole activity with respect to marketplace sales is to handle transactions between two parties.” Under the bill, a marketplace facilitator will be considered the retailer of each sale the facilitator facilitates on its forum for a marketplace seller. A marketplace facilitator may not be liable for failing to collect and remit the correct amount of sales tax if (1) the marketplace facilitator as a system in place to require a seller to provide accurate information and has made a reasonable effort to obtain accurate information from the seller, and (2) any error in collecting and remitting was due to the seller providing insufficient or incorrect information to the marketplace that the marketplace relied on. This protection does not apply if the seller and the marketplace are affiliated
In California, Assembly Bill 147, which would adopt a $500,000 economic nexus standard for remote sellers and marketplaces, has passed the Assembly, but is still pending in the Senate. However, the CDTFA had previously issued guidance mandating that effective April 1, 2019, sellers meeting a $100,000/200 transactions threshold must begin collecting and remitting use taxes on sales made to California customers. Also effective April 1, 2019, any retailer whose sales into a local California district exceed the $100,000/200 transactions threshold will be considered to be engaged in business in that district and will be required to collect that district's use tax.
The New York Department of Taxation and Finance issued FAQs related to registration for remote sellers, noting the New York economic nexus standard of over $300,000 of gross receipts and over 100 sales transactions in the state “has been in the New York State Tax Law for decades” and the due to Court’s ruling in Wayfair, the “longstanding provision in the Tax Law automatically became operative and enforceable” on June 21, 2018. In the FAQs, the Department makes clear that both taxable and exempt sales count toward the gross receipts threshold and “each invoice, sales slip, contract, or other memorandum of sale issued for the sale of tangible personal property delivered into New York State,” for retail or wholesale, counts towards the transaction threshold. Within the FAQ’s, the Department takes the position that the “lookback period” for the June 21, 2018 date ( the date Wayfair was decided) is New York State sales for the period June 1, 2017 through May 31, 2018. Vendors that meet the economic nexus thresholds for this period, in the Department’s view, need to register immediately if they haven’t already done so. Lastly, the FAQs notes that if a taxpayer registered to collect and remit sales tax because it met the thresholds, but its sales have since fallen below the thresholds for the most recent four sales tax quarters, and the vendor has no other connections with New York that satisfy the definition of a sales tax vendor, then that taxpayer may file a final return and stop collecting New York State sales tax. Please stay tuned to TWIST for more Wayfair updates.