Multistate: Marketplace Facilitator and Other Sales Tax Legislative Developments

There was a plethora of sales tax legislation signed into law as of late. In Mississippi, House Bill 379, which imposes tax collection responsibilities on marketplace facilitators was signed into law on June 30, 2020.  The provisions went into effect on July 1, 2020. Under the bill, a “marketplace facilitator” is defined as any person who facilitates a retail sale by a seller by (1) listing or advertising for sale by the retailer in any forum, tangible personal property, services or digital goods that are subject to tax, and (2) directly or indirectly through agreements or arrangements with third parties collects payment from the customer and transmits that payment to the retailer. A marketplace facilitator, similar to a remote seller, is deemed to be doing business in state if it has in-state sales that exceed $250,000 in any consecutive twelve month period. A sale made through a marketplace facilitator is a sale of the marketplace facilitator and not the sale of a marketplace seller for purposes of determining whether a person exceeds the $250,000 in sales threshold. The bill also permits a marketplace facilitator and marketplace seller to enter into a contractual arrangement whereby the marketplace seller remains responsible for collecting and remitting the applicable taxes and fees. However, the ability to contract applies only if the marketplace seller (including its related entities and franchisees) has annual gross sales in the U.S. of more than $1 billion; the marketplace seller provides evidence to the facilitator that it is registered in Mississippi; and the marketplace facilitator informs the Department that the marketplace seller will be collecting and remitting the applicable taxes and will be liable for any failure to collect or remit. The bill excludes from the definition of “retail sale” any sales by a third-party food delivery service that delivers food from an unrelated restaurant to a customer, regardless of whether the customer orders and pays for the food through the delivery service or whether the delivery service adds fees or upcharges to the price of the food.

In Tennessee, Senate Bill 2932 lowers the economic nexus threshold for dealers and marketplace facilitators. The threshold is now $100,000 in total sales over a twelve month period; it was previously a $500,000 in sales threshold. This provision takes effect October 1, 2020, which is also when Tennessee’s marketplace facilitator provisions become effective.

North Carolina House Bill 1079 provides statutory clarification that tax is not imposed on “sales of a digital audio work or digital audiovisual work that consists of nontaxable service content when the electronic transfer of the digital audio work or digital audiovisual work occurs contemporaneously with the provision of the nontaxable service in real time.” Additionally, with respect to taxpayers making sales of digital audio/audiovisual works for continuing education approved by a licensing board or for professional development for school board members, administrators, or staff, the Department will not take assessment action for any sales and use tax due for a filing period beginning on or after October 1, 2019, and ending prior to August 1, 2020.

In Rhode Island, two bills were enacted (House Bill 7532A and Senate Bill 2650A) that expand the imposition of sales tax on specified digital products. Previously, sales tax was imposed on the sale, storage, use, or other consumption of specified digital products. The bills amend the statute to specify that tax is also due on the right to use specified digital products on a permanent or less than permanent basis and regardless of whether the purchaser is required to make continued payments for the right. This also includes any license, lease, or rental of the specified digital products. The measures are intended to ensure that Rhode Island can remain in compliance with the Streamlined Sales and Use Tax Agreement and can apply its sales tax to streaming services and other digital products in which the right of use is less than permanent. Please stay tuned to TWIST for additional sales and use tax updates.