State lawmakers continue to enact economic nexus legislation to take advantage of the authorization contained in the U.S. Supreme Court’s decision in South Dakota v. Wayfair. In addition, a rapidly increasing number are imposing the tax collection obligation on what they are terming marketplace facilitators or marketplace providers. The definitions of “marketplace facilitator” or “marketplace provider” vary from state to state, but as a general matter, they include persons and entities that provide a forum for displaying and advertising for sale the products of multiple sellers, and either directly or by contract or affiliation, provide payment processing services for transactions conducted via the marketplace. In addition, many of the bills provide extensive details on the obligations of marketplaces and marketplace sellers and the protections provided to marketplaces should they collect and remit the wrong amount of tax. These bills should be carefully reviewed by affected marketplaces. Marketplace sellers should also examine the bills carefully to determine any documentation they may need to relieve them of the obligation to collect, among other issues. The marketplace collection legislation enacted in the past week is outlined below.
In New Mexico, Governor Michelle Grisham signed House Bill 6, a comprehensive tax reform bill that includes provisions requiring remote sellers and marketplace providers to collect and remit the gross receipts tax effective July 1, 2019. A remote seller or a marketplace lacking a physical presence in New Mexico is considered to be engaged in business in the state if, in the previous calendar year, it had at least $100,000 in total taxable gross receipts. Under the new law, the marketplace provider will be responsible for collection and remittance of tax on sales they facilitate, and marketplace sellers will be allowed a deduction from gross receipts for such sales facilitated provided they have documentation that the marketplace provider is registered for tax collection.
In Rhode Island, Governor Gina Raimondo signed two bills (Senate Bill 251 and House Bill 5278) that impose a sales tax collection and remittance obligation on remote sellers, marketplace facilitators, and referrers effective July 1, 2019. The economic nexus standard incorporated into the bills is gross revenue equal to or exceeding $100,000 or 200 separate transactions from the sale of tangible personal property, prewritten computer software delivered electronically or by load and leave, vendor-hosted prewritten software, or taxable services delivered into Rhode Island. Under current Rhode Island law, certain entities, including non-collecting retailers, are subject to various use tax reporting requirements if they do not collect tax on sales into the state. The Department of Taxation’s recently issued quarterly newsletter provides some guidance on the bills and clarifies that entities collecting should continue to do so. Entities providing notices to consumers should continue to provide the required notices through June 30, 2019. After that time, assuming the entity meets the economic nexus standards, it must collect and remit. The newsletter reminds use tax reporting entities that they may have use tax reports to file in early 2020 based on taxable transactions occurring from January 1, 2019 through June 30, 2019.
In West Virginia, House Bill 2813 (signed March 27, 2019) codifies the Department of Revenue’s existing economic nexus standards for remote sellers that has been in effect since January 1, 2019. In addition, effective July 1, 2019, the bill extends the collection and remittance obligation to marketplace facilitators and referrers (as defined) that meet the $100,000 or more in gross revenue or 200 or more West Virginia sale transactions threshold.
Effective October 1, 2019, Utah Senate Bill 168 (signed April 1, 2019) expands the state’s economic nexus provisions to marketplace facilitators. Particularly, the bill imposes a sales tax collection and remittance obligation on a marketplace facilitator that, in the previous or current calendar year, exceeds $100,000 in gross revenue from Utah sales or has 200 or more sales transactions measured by both the marketplace’s own sales and sales facilitated for others.
In Hawaii, Senate Bill 396 was signed into law on April 4, 2019. Under this bill, a marketplace facilitator is deemed to be the seller of tangible personal property, intangible property, or services and the seller on whose behalf the sale is made is deemed to be making a wholesale sale. Persons, other than marketplace facilitators, who provide a forum in which sellers list or advertise goods, services, or intangibles for sale and takes or processes sales orders, must comply with certain use tax notice and reporting requirements. The bill takes effect on January 1, 2020.
In addition to these recently-signed bills, legislation imposing a collection obligation on marketplaces is enrolled/or pending signature in New York (budget bills A. 2009-C and S. 1509C), Maryland (Senate Bill 728) and Idaho (House Bill 259).
The Nebraska Department of Revenue has issued guidance in light of recently enacted Legislative Bill 284, which imposes a sales and use tax collection and remittance obligation on marketplace facilitators and was signed into law on March 21, 2019. Marketplace facilitators with over $100,000 in receipts or facilitating more than 200 transactions in the previous or current calendar year must begin collecting tax on April 1, 2019. The guidance also summarizes other key points of the new law. Please stay tuned to TWIST for future Wayfair-related updates.