State taxing authorities are beginning to issue guidance for remote sellers and marketplace facilitators to provide guidance on recently-enacted remote seller and marketplace nexus laws. Recall, remote seller/marketplace laws in Arizona, California, Colorado, Massachusetts, Maryland, Maine, Nevada, North Dakota, Tennessee, Texas, and Utah become effective October 1, 2019. The Kansas Department of Revenue will also begin enforcing sales tax collection requirements for remote sellers effective October 1. Arizona, Arkansas, California, Iowa, Minnesota, Ohio, Oklahoma, and South Carolina have all issued guidance in the past few weeks. New Hampshire has also issued guidance with regard to its so called “anti-Wayfair” law.
Some of the noteworthy updates are as follows. The Arizona Department of Revenue created a website with resources and guidance on the new economic nexus standards for remote sellers and marketplace facilitators. Remote sellers and marketplace facilitators can begin registering for transaction privilege tax (TPT) on September 9 in advance of the law becoming effective on October 1, 2019. The Department has also established an E-Commerce Compliance and Outreach (ECCO) team to answer questions about the licensing and registration process. In determining whether a remote seller or a marketplace facilitator meets the state’s economic nexus thresholds, remote sellers and marketplace facilitators should account for income generated by affiliated parties, as well as their own sales. Further, the Department’s guidance provides that remote sellers and marketplace facilitators located outside the state are required to source sales based on the shipping address of the customer, or the billing address if the shipping address is not available. Conversely, a marketplace facilitator located in Arizona will source sales based on the marketplace facilitator’s location in Arizona if the order information is received in Arizona; otherwise, sourcing will be based on the customer’s address if the order information is received outside of Arizona.
The Ohio Department of Taxation created a webpage for out-of-state sellers and marketplace facilitators. The webpage contains information on registration requirements for out-of-state sellers and marketplace facilitators. Although Ohio retains its origin-based sourcing rules for intrastate sales of tangible personal property, the Department reminds taxpayers that sales made by a marketplace facilitator will be sourced to “the location where the consumer receives the property or service that is sold.”
In South Carolina, the Department of Revenue issued Revenue Ruling 19-6, which addresses the sales and use tax obligations of marketplace facilitators. The ruling states that “marketplace facilitators” can include brick and mortar retailers, online retailers, and online food delivery service companies. The ruling also contains comprehensive examples of different marketplace transactions and addresses the sales and use tax responsibility of each party.
In Arkansas, the Department of Finance and Administration Revenue Legal Counsel issued Opinion No. 20190501 clarifying that the economic nexus thresholds that apply to remote sellers and marketplace facilitators are limited to taxable sales of goods, services, or specified digital products. Thus, for purposes of determining whether the threshold has been exceeded, a remote seller and marketplace facilitator should not consider exempt sales.
The Iowa Department of Revenue recently adopted new regulations addressing the state’s economic nexus and marketplace law. The regulations provide that a marketplace seller does not sell products on a marketplace when merely advertising the products on the marketplace. Further, coupons and discounts offered by marketplace facilitators and remote sellers are retailer’s discounts which reduce the taxable amount of a sale. Finally, the regulations provide that marketplace facilitators can claim a credit for the previously remitted sales taxes associated with items returned by customers where the refund may be issued by the marketplace facilitator or marketplace seller.
In addition to state reactions, localities are also responding to the Wayfair decision. The City Council in Nome, Alaska, a city with a population of less than 5,000 people, adopted an ordinance on August 26, 2019 generally providing that a seller will be required to collect Nome local tax if it lacks a physical presence in the city, but in the current or previous calendar year, has gross revenue of $100,000 or more and at least 100 separate transactions from sales of property, digital products, or services delivered into the state. The ordinance extends the economic nexus provisions to marketplace facilitators and is effective on the first day of the first calendar month following the date the ordinance was passed, which is September 1, 2019. It’s unclear whether the City intends to enforce the ordinance as of that date, as efforts are still underway to create a centralized system for remote sellers and marketplaces to remit local taxes. Please stay tuned to TWIST for future Wayfair-related updates.