State lawmakers continue to enact legislation and issue guidance in response to the U.S. Supreme Court’s decision in South Dakota v. Wayfair. This week's updates include Hawaii, Arizona, Michigan, North Carolina, South Carolina, and Lousiana.
The Hawaii Department of Taxation recently released guidance on the General Excise Tax (GET) responsibilities of marketplace facilitators. A 2019 Hawaii law (Act 2), which becomes effective January 1, 2020, defines a marketplace facilitator as any person who sells or assists in the sale tangible personal property, intangible property, and services by providing a forum for listing or advertising items for sale and by collecting payment from the purchaser, either directly or indirectly. Certain entities, including food delivery services, transportation network companies, task-based service platforms, and data access marketplaces are specifically identified in the guidance as marketplace facilitators. The guidance also has an extensive discussion of the treatment and classification of marketplaces and entities involved in facilitating sales of travel and tourism-related services. A marketplace facilitator is considered to be engaged in business in Hawaii if it has more than $100,000 in annual receipts or 200 transactions in Hawaii.
In other news, the Arizona Department of Revenue rescinded Transaction Privilege Tax Ruling 16-1 in light of Arizona’s new marketplace facilitator law that was effective October 1, 2019. In the ruling, the Department had held that an online marketplace was considered a retailer when it was the “contact point for customer service, processing payments on behalf of the merchant and providing or controlling the fulfillment process.” With the new law imposing a collection and remittance obligation on marketplace facilitators, the ruling no longer reflects the Department’s policy.
In Michigan, House Bills 4540, 4541, 4542, and 4543 were unanimously passed in the House and are now pending in the Senate. If enacted, House Bills 4542 and 4543 would codify the economic nexus thresholds established in the Department of Treasury’s RAB 2018-16. Recall, these thresholds went into effect October 1, 2018. House Bills 4540 and 4541, if enacted, would extend the economic nexus thresholds to marketplace facilitators. Under the bills, a marketplace facilitator would be required to collect and remit the sales and use tax on all taxable sales made directly by the facilitator or facilitated on behalf of a marketplace seller. The bills would define a marketplace facilitator as “the person [that] facilitates a retail sale by a marketplace seller by listing or advertising for sale by a marketplace seller in a marketplace, tangible personal property or taxable services and either directly or indirectly through agreements or arrangements with third parties or its affiliates collecting payment from the customer and transmitting that payment to the marketplace seller for consideration.” The definition of a marketplace facilitator in House Bill 4541 (which addresses use tax) would also specify exclusions for certain advertising service providers, persons making sales of accommodations, and telecommunication service providers. The marketplace provisions would take effect on January 1, 2020. There is an expectation that these bills will pass the Senate and be signed by Governor Whitmer.
In North Carolina, Senate Bill 557 has passed in the Senate and has been referred to the House. In addition to other tax changes, this bill would require marketplace facilitators that have either gross sales in excess of $100,000 or engage in 200 or more separate transactions into the state annually to begin collecting and remitting sales taxes as of February 1, 2020. Note the North Carolina budget bill, which contained similar provisions, was vetoed by Governor Cooper earlier this year for other reasons.
Moreover, Amazon Services LLC has filed a notice of appeal with the South Carolina Court of Appeals over a recent ALJ holding. Recall, an ALJ for the South Carolina Administrative Law Court concluded that Amazon was in the “business of selling” tangible personal property at retail because a customer’s interaction was almost entirely with the marketplace and the marketplace accepted money in exchange for products.
In Louisiana, Walmart.com argued before that Louisiana Supreme Court that it was not a “dealer” required to collect local Jefferson Parish sales tax on third-party sales made through its marketplace for pre-Wayfair tax periods. Recall, the lower court held that the definition of “dealer” encompasses a wider group of people than a “seller.” In the court’s view, had the legislature intended the collection duty to apply only to sellers, it presumably would have used that defined term as opposed to “dealer.” Please stay tuned to TWIST for more Wayfair and marketplace updates.