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NEWS & TIPS
The Sales Tax Institute reviews numerous sales tax publications to monitor state activity on various topics related to sales and use tax. By checking updates routinely, you may be alerted to an impending tax law change critical to your business.
Browse recent and archived news items by searching relevant categories, states or descriptions at right
The information listed here is high-level summary and background material intended to help you stay current in the dynamic area of sales and use tax. Sources include CCH State Tax Day, Sales and Use Tax Alert, Sales Tax Notes, Vertex, Inc. Reference Manuals, Westlaw, and other miscellaneous state tax newsletters and Department of Revenue notices.
Please note that these summaries omit many details and special rules, and cannot be regarded as legal or tax advice. For more information, be sure to contact your tax advisor.
HOT NEWS UPDATES:
On July 14, 2016, Rep. Jim Sensenbrenner (R-WI) introduced the No Regulation Without Representation Act of 2016. Taking the opposite approach of the Marketplace Fairness Act and Remote Transactions Parity Act, this proposed bill would limit the ability of states to require remote sellers to collect use tax. If enacted, the Act would codify the physical presence requirement established by the US Supreme Court in Quill Corp v. North Dakota. The bill would define physical presence and create a de minimis threshold. If enacted, the bill would preempt click-through nexus, affiliate nexus, reporting requirements and marketplace nexus legislation. The bill would be effective as of January 1, 2017. The bill defines “seller” and provides that states and localities may not:
- Obligate a person to collect a sales, use or similar tax;
- Obligate a person to report sales;
- Assess a tax on a person; or
- Treat the person as doing business in a state or locality for purposes of such tax unless the person has a physical presence in the jurisdiction during the calendar quarter that the obligation or assessment is imposed.
Persons would be considered to have a physical presence only if during the calendar year the person:
- Owns or leases real or tangible personal property in the state;
- Has one or more employees, agents or independent contractors in the state specifically soliciting product or service orders from customers in the state or providing design, installation or repair services there; or
- Maintains an office in-state with three or more employees for any purpose.
Physical presence would not include:
- Click-through referral agreements with in-state persons who receive commissions for referring customers to the seller;
- Presence for less than 15 days in a taxable year;
- Product delivery provided by a common carrier; or
- Internet advertising services not exclusively directed towards, or exclusively soliciting in-state customers.
The bill defines sellerto exclude marketplace providers; referrers; third-party delivery services in which the seller does not have an ownership interest; and credit card issuers, transaction or billing processors or financial intermediaries.Marketplace Providers are defined as any person other than the seller who facilitates a sale which includes listing or advertising the items or services for sale and either directly or indirectly collects gross receipts from the customer and transmits the amounts to the marketplace seller. (No Regulation Without Representation Act of 2016 (H.R. 5893))
Effective June 1, 2016, South Dakota’s sales and use tax rate increases from 4% to 4.5%. The new rate applies to: the sale, lease, or rental of tangible personal property, products transferred electronically, and services; excise tax on the purchase of farm machinery; the amusement device tax; and special jurisdiction tax rates on Indian Country where there is a tax collection agreement.(H.B. 1182, Laws 2016, effective June 1, 2016; Release, South Dakota Department of Revenue, March 14, 2016)
Louisiana’s state sales and use tax rate on sales and leases of tangible personal property and sales of certain services increases from 4% to 5%, effective April 1, 2016 through June 30, 2018. A new provision lists 65 items that are exempt or excluded from the additional 1% tax. For the entire list of items, visit the Louisiana Department of Revenue website. The transactions that are exempt from the additional 1% tax do not completely match the transactions that were exempt from the previous 4% tax.(Act 26 (H.B. 62), Laws 2016, First Extraordinary Session)
On March 22, 2016, South Dakota Governor Dennis Daugaard signed into law economic nexus legislation. The legislation, effective May 1, 2016, adds sales and use tax collection requirements for remote sellers who meet certain sales thresholdsand makes sales of tangible personal property, products transferred electronically, and services for delivery into South Dakota. It is important to note that virtually everything is taxable in South Dakota including professional services like legal and accounting services.
A retailer would be presumed to be liable for the collection of sales and use tax in South Dakota, even if the seller does not have a physical presence in state, if the seller meets either of the following criteria in the previous or current calendar year:
- The seller’s gross revenue from the sale of tangible personal property, any product transferred electronically, or services delivered into South Dakota exceeds $100,000; or
- The seller sold tangible personal property, any product transferred electronically, or services for delivery into South Dakota in 200 or more separate transactions.
In anticipation of a challenge and really following Justice Kennedy’s advice in the Direct Marketing Association decision, the legislation provides an expedited appeals process for any challenges to the constitutionality of the law. The legislation also provides that enforcement of the law will be “stayed by the courts until the constitutionality of this law has been clearly established by a binding judgment, including, for example, a decision from the Supreme Court of the United States abrogating its existing doctrine, or a final judgment applicable to a particular taxpayer.” All remote sellers should evaluate their South Dakota sales activities and determine their position on this new law. (S.B. 106, effective May 1, 2016)
The Puerto Rico Department of Treasury has announced that the Commonwealth’s transition from sales and use tax to VAT has been pushed to June 1, 2016. The transition was originally slated to take place on April 1, 2016.
UPDATE: Puerto Rico's transition from sales and use tax to VAT has been vetoed. In May 2016, the legislature passed a bill repealing the changes that would have created the VAT. Governor Padilla vetoed that repeal, and the legislature overrode his veto.