KPMG report: State and local responses to “Wayfair” decision (CA, DC, Philadelphia, WI)

December 17, 2018

More U.S. state and local governments have responded to the U.S. Supreme Court’s decision in "South Dakota v. Wayfair, Inc."

In Wayfair, the U.S. Supreme Court overruled the physical presence nexus standard of Quill and National Bellas Hess with respect to state and local taxation of remote sales. Soon after the Supreme Court issued its decision in Wayfair, various states began issuing guidance or statements or began to take legislative actions in response to the decision in the Wayfair case.



Assembly Bill 147 was introduced in the California Assembly, and if enacted, would amend the definition of a retailer “engaged in business” in California to include any retailer that, in the preceding calendar year or the current calendar year, had a cumulative sales price from the sale of tangible personal property for delivery in California that exceeds $500,000.

The definition of a “retailer” would also be amended to include every person that is registered with the Department as a retailer for purposes of the sales and use tax law or that is a retailer engaged in business in California (as defined) and that facilitates a retail sale by another seller that is not registered with the tax department and that (1) lists or advertises for sale, in any forum, tangible personal property owned by the seller that is subject to tax under the sales and use tax law; and (2) directly or indirectly through arrangements with third parties, collects payment from the customer and transmits that payment to the seller, regardless of whether compensation or other consideration is received in exchange for its services.

The bill specifies that a person facilitating a sale of tangible personal property for another seller that is not registered for sales tax collection is considered to be the seller of the tangible personal property for purposes of use tax collection.

Assembly Bill 147 also addresses district use taxes and would require districts that impose district use taxes to include a provision providing that a retailer engaged in business in the district includes any retailer that, in the preceding calendar year or the current calendar year, has total cumulative sales of tangible personal property to purchasers in the state in excess of $500,000, thereby requiring those retailers to collect those district use taxes.

If enacted (the bill requires a two-thirds majority for passage), the bill would be effective immediately.



In addition to the introduction of Assembly Bill 147, the California Department of Tax and Fee Administration (CDTFA) released two notices addressing the decision in the Wayfair case.

  • Effective April 1, 2019, remote retailers with over $100,000 from taxable sales of tangible personal property, in the preceding or current calendar year, or 200 or more separate transactions of such sales into California will be required to register with the CDTFA to collect and remit California sales and use tax.
  • Effective April 1, 2019, all retailers registered or required to be registered with the CDTFA are required to collect and remit district use tax to the CDTFA if, during the preceding or current calendar year, the retailer makes sales into the district exceeding $100,000 or has 200 or more separate sales transactions into the district.

California’s statewide sales tax rate includes a uniform local tax rate. A number of local governments (and groups of local governments) have adopted additional, voter-approved district sales and use taxes. Currently, a seller is required to collect district use tax on goods shipped into the district if it is “engaged in business” in the district.


District of Columbia

The D.C. Council on December 4, 2018, passed legislation that would impose a sales and use tax collection obligation on remote sellers. Effective January 1, 2019, the bill would require remote sellers to collect and remit sales tax if, in the previous calendar year or the current calendar year, the remote seller had gross receipts from all retail sales delivered into the District of Columbia that exceeded $100,000 or 200 or more separate retail sales delivered into D.C.

The legislation also includes provisions regarding sales tax collection and remittance obligations of marketplace facilitators and subjects digital goods to taxation. The bill has gone to the mayor for signature; after the bill is signed, there is a mandatory 30-day congressional review period.



The city of Philadelphia, Pennsylvania, has issued draft amendments [PDF 424 KB] to its business income and receipts tax (BIRT) regulations to replace the current “active presence” nexus standard with an economic nexus threshold effective for tax years beginning on or after January 1, 2019.

The BIRT is imposed upon “taxable activity” attributable to or within the city. Taxable activity generally includes any trade, business, profession, vocation or any manufacturing, commercial, service, financial or utility business or activity that originates from, is carried on through, directed from or otherwise attributable to Philadelphia.

A taxpayer generally is subject to the gross receipts portion and the net income portion of the BIRT when the taxpayer has sufficient contact with the city to be taxed without violating the U.S. Constitution. Any person that is otherwise subject to the BIRT, but whose business activities in Philadelphia are limited to mere “solicitation” is not subject to the net income portion of the tax (pursuant to the rules under Pub. L. No. 86-272).

  • For tax years beginning prior to January 1, 2019, no more than an “active presence,” defined as “purposeful, regular and continuous efforts in Philadelphia in the pursuit or profit or gain and the performance in Philadelphia of activities essential to those pursuits” is required to constitute doing business in Philadelphia.
  • For tax years beginning on or after January 1, 2019, an “economic presence” is sufficient to constitute “doing business.” “Economic presence” means substantial business presence evidenced by a purposeful direction of business toward Philadelphia examined in light of the frequency, quantity, and systematic nature of a business organization’s economic contacts with Philadelphia.

Effective January 1, 2019, the amendments would subject a business to the BIRT if it meets the definition of “economic presence” and has gross receipts exceeding $100,000 during any 12-month period ending in the current tax year in Philadelphia. However, whether a business meets the threshold will depend on the business’ activities in Philadelphia. The amendment provides that the following activities would not necessarily create economic nexus: (1) meeting with suppliers of goods or services, (2) meeting with a Philadelphia government representative, (3) attending occasional meetings, (4) holding recruiting events, or (5) attending/participating at a trade show at which no orders are taken and no sales are made.



Wisconsin Senate Bill 883 was signed into law on December 14, 2018.  This legislation makes a number of changes to Wisconsin’s tax laws, including codifying an emergency regulation that adopted economic nexus standards effective October 1, 2018. 

Under Senate Bill 883,  a sales tax collection and remittance obligation is imposed on a retailer that has, in the previous or current tax year, annual gross sales into the state exceeding $100,000 or makes 200 or more separate sales transactions into the state. The legislation clarifies that gross sales includes taxable and nontaxable sales. An out−of−state retailer’s annual amounts include all sales into Wisconsin by the retailer on behalf of other persons and all sales into Wisconsin by another person on the retailer’s behalf.


U.S. Congress

There was also some recent U.S. congressional activity.

On December 6, 2018, Senators Shaheen and Hassan from New Hampshire and Senators Wyden and Merkley from Oregon introduced Senate Bill 3725, the “Online Sales Simplicity and Small Business Relief Act of 2018.” This bill would prohibit states from imposing a sales tax collection duty on remote sellers on sales prior to June 21, 2018 (the date the U.S. Supreme Court issued the Wayfair decision). The bill would allow states to require remote sellers to collect only for sales occurring after January 1, 2020. A “small business remote seller exception” would apply to sellers with gross annual receipts in the United States during the proceeding calendar year that are not more than $10 million.  These sellers would not be required to collect and remit unless and until Congress approved an interstate compact applicable to the sales and use tax collection obligations of remote sellers.

A similar bill (H.R. 6824) has been introduced in the House of Representatives.


Read a December 2018 report prepared by KPMG LLP


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