Detailed Multistate Development
With many state legislatures now in session for 2020, we are continuing to see proposed legislation that would require marketplace facilitators to collect and remit. In addition, many states have recently issued administrative guidance addressing various issues facing remote sellers and marketplace facilitators.
In Georgia, the Legislature has passed House Bill 276, which would create a sales and use tax collection obligation for marketplace facilitators. This bill was carried over from the 2019 legislative session. If signed by the governor, effective April 1, 2020, a marketplace facilitator would be required to collect and remit sales and use tax on sales it facilitates if in the previous or current calendar year it has retail sales of at least $100,000. A marketplace facilitator would include a person that promotes, markets, advertises, takes orders or reservations for, or otherwise assists a seller in making a retail sale. To be considered a marketplace facilitator, the person must also collect, charge, process. or similarly facilitate payment for such retail sales. For purposes of the marketplace provisions, Georgia would follow destination-based sourcing rules. A marketplace facilitator would be relieved of liability if it can demonstrate that failure to collect and remit tax was due to insufficient or incorrect information provided by the marketplace seller. If relief is granted, liability would shift to the marketplace seller. Finally, the bill would exclude certain franchisors and dealers from the marketplace facilitator provisions if (a) the franchisor/dealer has annual gross sales of at least $500 million; (b) the franchisee/seller is registered in Georgia; and (c) the franchisee/seller and franchisor/dealer has a contract in which the franchisee/seller is responsible for collecting and remitting the applicable tax.
The Louisiana Sales and Use Tax Commission for Remote Sellers is required to begin collecting state and local sales and use tax from remote sellers no later than July 1, 2020. While the Commission is not yet ready to begin collection, it has adopted several regulations in preparation for that task. Recently, the Commission adopted regulations requiring that, for tax periods on or after July 1, 2020, remote sellers required to collect and remit the sales and use tax must file tax returns and make sales and use tax payments electronically. In addition, the Commission adopted regulations that describe the types of policy statements the Commission may issue. The regulation also contains the proper procedures to which the Commission must adhere for issuing the policy statements and guidance. Before it can begin requiring collection, the Commission must publish a notice of enforcement not later than 30 days prior to the effective date.
In North Carolina, the Department of Revenue recently issued technical bulletins addressing several excise taxes, including the white goods disposal tax, solid waste disposal tax, scrap tire disposal tax, and dry-cleaning solvent tax. According to the bulletins, these taxes are considered by the Secretary of Revenue to be additional sales or use taxes. Thus, while not explicitly stated, a marketplace facilitator may be required to collect and remit these taxes if it is considered a retailer for state sales and use tax purposes. Recall, North Carolina recently enacted marketplace facilitator provisions, which would treat the facilitator as the retailer of a sale if it exceeds economic nexus thresholds in the state.
In Arkansas, the Department of Finance and Administration ruled that a remote seller of new tires, wheels, and related accessories was required to collect and remit the $3 Arkansas rim removal fee if it exceeded the state’s economic nexus threshold. The taxpayer was of the belief that it would not be required to collect the fee because it did not conduct the removal of tires from the rim as part of its transactions. In the Department’s view, the fee must be charged on sales to end-users because the retailer was selling replacement tires that “necessitate[d] the removal of a different tire from the same rim.” The Department noted, however, that in cases where the customer was purchasing the tire for resale, the customer purchasing for resale would be responsible for collecting and remitting the fee when sold to an end-user. The ruling also makes clear that a marketplace facilitator selling new tires to an end-user in Arkansas would also be responsible for the rim removal fee. The Department also ruled that the taxpayer was not responsible for collecting the $1 import fee imposed on used tires brought into the state.
In other related news, the National Conference of State Legislatures Task Force on State and Local Taxation unanimously approved its Marketplace Facilitator Model Legislation. The model legislation seeks to provide clarity and consistency with regard to marketplace facilitator provisions. Notably, the model legislation provides for a waiver of the marketplace collection and remittance requirements if the marketplace facilitator can demonstrate to the state department that “substantially all of its marketplace sellers already are” registered with the state tax agency. The model legislation also allows a marketplace facilitator to contract its collection and remittance obligations to certain sellers, providing that the seller and its related entities (including franchisees) exceed a specified sales volume. For purposes of the marketplace facilitator definition, the model legislation requires that a person, directly or indirectly through arrangements with others, collect payment on behalf of the seller. The model also provides for certain persons or industries to be excluded from the marketplace facilitator definition. Finally, the model legislation contains a relief provision for marketplace facilitators that can demonstrate that the failure to collect and remit tax was due to incorrect or insufficient information providing by the marketplace seller. Please stay tuned to TWIST for future Wayfair-related updates.
This Week's Developments