Source: http://www.dillontaxconsulting.com/blog-michael-dillon-tax-consutling?date=2018-06-27
Timestamp: 2019-04-20 14:41:14+00:00

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Dillon Tax Consulting provides tax advisory and compliance services and solutions to companies across all industries, ranging in revenue size from several hundred thousand dollars to multi-billion dollars.
Wayfair: The U.S. Supreme Court Throws Out the Physical Presence Requirement for Sales Tax Nexus – What Does This Mean for Remote Sellers?
In Part One of this two-part article, we discussed the physical-presence requirement for sales tax nexus, as established by the U.S. Supreme Court in the 1992 case Quill Corp. v. North Dakota, 504 U.S. 298 (1992). We also provided an overview of the Court’s decisions that led to the Quill physical-presence standard, Congress’s inability to change or overrule the decision through legislation, and state efforts to expand or ignore the physical-presence standard, through attributional and agency nexus theories, click-through and affiliate nexus provisions, use tax reporting and notification standards, and most recently, economic nexus standards.
The United States Supreme Court is set to hear oral arguments on April 17, 2018, in South Dakota v. Wayfair, Inc. et. al. [South Dakota v. Wayfair Inc., et. al., 901 N.W.2d 754 (S.D. September 13, 2017); cert. granted (U.S. January 12, 2018)(No. 17-494)] At issue is whether the Court should abrogate Quill's sales-tax-only, physical-presence requirement?
Idaho – Beginning June 1, 2019, HB 259 requires remote sellers to collect sales tax if, in the previous or current calendar year, it had aggregate sales within the state, or deliveries to locations within the state, exceeding $100,000.
Virginia – Effective July 1, 2019, HB 1722 / SB 1083 provides that remote sellers are required to register, collect and remit retail sales and use if they have more than $100,000 in annual gross revenue from sales in Virginia, or at least 200 separate sales transactions in Virginia in the previous or current calendar year.
Arkansas – Beginning July 1, 2019, SB 576 provides that remote sellers are required to collect sales tax if, in the previous or current calendar year, it had aggregate sales within the state, or deliveries to locations within the state, exceeding $100,000 or 200 transactions. A sale made through a marketplace facilitator constitutes a sale of the marketplace facilitator for purposes of satisfying the economic nexus thresholds and not a sale of the marketplace seller.
New Mexico – Beginning July 1, 2019, HB 6 provides that remote sellers are required to remit gross receipts tax if, in the previous calendar year, it had aggregate gross receipts from sales, leases and licenses of tangible personal property, or sales of licenses or services sourced to New Mexico of $100,000 or more. A marketplace seller may deduct receipts from transactions facilitated by a marketplace provider. However, to take a deduction the seller must get documentation from the marketplace provider showing that the marketplace provider is registered with the Taxation and Revenue Department, and has remitted or will remit taxes for those transactions.
Kentucky - HB 354 eliminates the use tax notice requirements for remote sellers.
Idaho – Beginning June 1, 2019, HB 259 requires remote sellers and marketplace facilitators to collect sales tax if, in the previous or current calendar year, it had aggregate sales within the state, or deliveries to locations within the state, exceeding $100,000. The bill requires marketplace facilitators to obtain a separate seller’s permit for collecting sales and use taxes on transactions facilitated for third-party sellers.
Kentucky – Beginning July 1, 2019, HB 354 provides that marketplace providers are required to collect sales tax if, in the previous or current calendar year, it had aggregate sales within the state, or deliveries to locations within the state, exceeding $100,000 or 200 transactions.
Virginia – Effective July 1, 2019, HB 1722 / SB 1083 provides that Remote sellers and marketplace facilitators are required to register, collect and remit retail sales and use if they have more than $100,000 in annual gross revenue from sales in Virginia, or at least 200 separate sales transactions in Virginia in the previous or current calendar year.
Arkansas – Beginning July 1, 2019, SB 576 provides that remote sellers and marketplace facilitators are required to collect sales tax if, in the previous or current calendar year, it had aggregate sales within the state, or deliveries to locations within the state, exceeding $100,000 or 200 transactions. A sale made through a marketplace facilitator constitutes a sale of the marketplace facilitator for purposes of satisfying the economic nexus thresholds and not a sale of the marketplace seller.
New Mexico – Beginning July 1, 2019, HB 6 provides that remote sellers and marketplace providers are required to remit gross receipts tax if, in the previous calendar year, it had aggregate gross receipts from sales, leases and licenses of tangible personal property, or sales of licenses or services sourced to New Mexico of $100,000 or more.
West Virginia – Beginning July 1, 2019, HB 2813 codifies economic nexus threshold and imposes economic nexus provisions for marketplace facilitators and referrers, in addition to remote sellers. A marketplace facilitator, referrer, or remote seller is required to collect use tax when sales equal or exceed $100,000 in gross revenue or 200 or more separate transactions for an immediately preceding or current calendar year. A “marketplace facilitator” is defined as a person that contracts with one or more sellers to facilitate (for consideration) sales of the seller’s products through an electronic of physical marketplace. A marketplace facilitator engages in activities, directly or indirectly, such as communicating offers between buyers and marketplace sellers, owning or operating electronic or physical infrastructure that brings together buyers and sellers, or providing a virtual currency used by purchasers.
Wyoming – Effective July 1, 2019, HB 69 provides that marketplace facilitators are required to collect and remit sales tax on all sales that the marketplace facilitator makes on its own behalf as well as sales that the facilitator facilitates on behalf of all marketplace sellers to customers in Wyoming, when sales equal or exceed $100,000 in gross revenue or 200 or more separate transactions for an immediately preceding or current calendar year. The marketplace facilitator must collect sales tax regardless of whether the marketplace seller has a sales tax permit or otherwise would have been required to collect sales tax if the sale had not been facilitated by the marketplace facilitator.
North Dakota – Effective October 1, 2019, SB 2338 provides that marketplace facilitators are considered retailers subject to North Dakota sales and use tax if they facilitate sales of property or services that are subject to North Dakota sales tax and gross sales into North Dakota exceed $100,000 in the previous or current calendar year.
Hawaii – Beginning January 1, 2020, SB 396 imposes general excise tax compliance obligations on marketplace facilitators, as the sellers of tangible personalproperty, intangible property or services for sales and use tax purposes. A new definition of "marketplace facilitator" was enacted and means any person who sells or assists in the sale of tangible personal property, intangible property, or services on behalf of another seller by providing a forum, whether physical or electronic, in which sellers list or advertise tangible personal property, intangible property, or services for sale; and collecting payment from the purchaser, either directly or indirectly through an agreement with a third party.
In the wake of the U.S. Supreme Court's decision in South Dakota v. Wayfair, states may now require remote sellers with no physical presence in a state to collect sales tax on sales of taxable products and services delivered to customers in that state. This ruling does not simply affect online retailers, but all sellers of taxable goods and services who make sales into state in which they lack physical presence. Attached as an informational reference tool is a listing of the states that have adopted some form of economic nexus standard. For simplicity sake, we have categorized them as South Dakota Economic Nexus (meaning those states that have adopted economic nexus thresholds similar to those adopted by South Dakota, Other Economic Nexus (meaning all other states that have adopted economic nexus thresholds that vary form those adopted by South Dakota) and Marketplace Nexus (meaning those states that have adopted a broader nexus provision, addressing the obligations of remote sellers, marketplace facilitators (e.g., Amazon) and referrers (e.g., commissioned referral agents) that exceed the state's precribes economic nexus thresholds). As noted, many of these states have adopted Notice and Reporting Requirements, which may impose obligations on a remote seller regardless of whether the seller exceeds the state's economic nexus thresholds.
Each of these states may have aspects of their laws that vary form the South Dakota law, which itself is still subject to consideration on remand from the US Supreme Court to the lower court for aspects of the the law not inconsistent with the Court's ruling in Wayfair regarding the physical presence rule. As such, each of these state economic nexus standards may be subject to judicial scrutiny to the extnet they may impose an undue burden on interstate commerce. Furthermore, states that have adopted these laws are only beginning to address the effective date that they intend to implement enforcement of the economic nexus standard in their state.
A number of states have also adopted Notice & Reporting Requirements, which compel remote sellers, typically whose annual sales exceed a certain threshold - often as low as $10,000 - to elect to either (1) to collect and remit sales tax on sales to customers in the state, despite lacking a physical presence, or (2) to notify customers on their website and on each invoice of the customer’s use tax reporting obligation, and to provide annual information to each customer and to the Department of Revenue regarding all sales customers in the state. Failure to do so results in penalties that typically are larger than the remote sellers sales in that state. For your consideration, attached as an informational tool is a listing of the states that have adopted notice and reporting requirements.
As such, it is incumbent on every remote seller to proactively engage someone - externally or internally - to closely monitor these and every state regarding implementation and enforcement of these provisions. Furthermore, every remote seller should implement processes to proactively monitor its sales activity - by revenue and transaction amount - both historically and prospectively, to ensure that they are meeting their obligations in each state and mitigating any historical exposure. Lastly, to the extent that a remote seller has or had physical presence nexus in a state (eg., by virtue of inventory in a third party fulfillment center), that seller should engage an expert to discuss the options to register and/or negotiate resolution of historical liabilities.
As I predicted in my March 24, 2018 article “The Future of the Quill Sales Tax “Physical Presence” Nexus Standard – Part Two”, yesterday the United States Supreme Court threw out the 51 year old physical presence sales tax nexus standard, when it rendered its decision in South Dakota v. Wayfair, Inc., et al., 585 U.S. __ (June 21, 2018). At issue was whether South Dakota may require remote sellers to collect and remit sales tax without some additional connection in the State other than more than $100,000 in annual sales or more than 200 transactions. The Supreme Court held that Quill Corp. v. North Dakota and National Bellas Hess Inc. v. Department of Revenue of Illinois -- which held that a state cannot require an out-of-state seller with no physical presence in the state to collect and remit sales taxes on goods the seller ships to consumers in the state -- are overruled, upheld the South Dakota nexus threshold, and remanded the case for further proceedings consistent with removal of the physical presence nexus standard.
Likewise, they or others may advise that in state auditors can and will hunt down Amazon FBA sellers, subject them to their state’s sales tax laws and assess them for historical liabilities relating to all prior periods in which they had inventory in an Amazon warehouse in the state (witness what California, Washington State and several other states are achieving in this regard).
The Multistate Tax Commission (MTC) has just announced a special tax amnesty program for unregistered online marketplace sellers that have established nexus and historical exposure as a result of storing inventory in third-party fulfillment centers that facilitate retail sales into the state (e.g., Amazon FBA program). Under the program, eligible taxpayers may obtain amnesty from any past due sales/use tax, and if applicable, income/franchise tax liability, including interest and penalties, in connection with online retail sales activity in the participating states.

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