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A South Carolina Court did not grant a request for injunction filed by the South Carolina Department of Revenue (DOR) to make Amazon collect South Carolina tax on FBA (Fulfillment by Amazon) sales. On November 8, 2017 the DOR had filed the motion to request that Amazon begin collecting sales tax on sales by third party sellers using Amazon’s platform within 10 days and remit these collected taxes to a trust fund to be held until the case is decided.  The South Carolina Department of Revenue argued that the ultimate tax due could exceed $500 million and the risk to the Department for collection or if it is determined that the tax is owed by the 3rd Party Sellers is so significant that the injunction should be granted.  The case premise is that Amazon has an obligation to collect tax on all sales executed through its platform including sales by 3rd party independent sellers. The case is scheduled to be heard in early November 2018.  Until then, the uncertainty regarding who has the obligation to collect tax on sales to customers in South Carolina remains. We will continue to monitor for developments. 


The Multistate Tax Commission opened a sales/use tax and income/franchise tax amnesty program for online marketplace sellers during the fall of 2017. Online marketplace sellers responded and a total of 852 of them applied to participate, overwhelming the MTC office that only deals with about 100 taxpayers per year.

Originally, the MTC received all the taxpayer’s necessary documentation before forwarding it to the state. Given the volume of applicants, the committee agreed to expedite the process by allowing taxpayers to send final voluntary disclosure agreements, tax registration forms, and other documents directly to the states. This procedural change only applies to sellers who are still waiting to receive state-signed voluntary disclosure agreements. The MTC will inform sellers if they have the option to send documents directly to the states.

For the previous four-year period, thirty applicants reported more than $1 million in back tax liability. Around a quarter of all applicants reported at least $100,000 in back tax liability.

Although the MTC program is closed, taxpayers who believe they have a liability should consider state offered amnesty programs or a voluntary disclosure.  Some states may be willing to negotiate with online sellers.  We are working with some states to negotiate more favorable terms. If you are interested, contact us.


Rhode Island issued a reminder about the state’s sales and use tax notice and reporting requirements for retail sale facilitators and non-collecting retailers that were contained in legislation enacted in August 2017.

A retail sale facilitator that had $100,000 or more in gross revenue from the sale of taxable goods/services in 2017 delivered in Rhode Island or 200 or more transactions of taxable goods/services delivered in Rhode Island, must provide a list to the Rhode Island Division of Taxation of names and addresses of retailers for whom the retail sale facilitator collected Rhode Island sales tax. This must happen on or before January 16, 2018. Retail sale facilitators must also provide contact information of retailers for whom they did not collect Rhode Island sales tax but still utilized the retail sale facilitator’s services in 2017.

A non-collecting retailer, on or before January 31 of each year, must send a written notice to all Rhode Island customers who have cumulative annual taxable purchases from the non-collecting retailer totaling $100 or more for the prior calendar year. Thus, a non-collecting retailer must send notice to each in-state customer who met or surpassed the $100 cumulative annual purchase threshold for the 2017 calendar year by January 31, 2018. Purchases made during the entire 2017 calendar year must be present in the report.

By February 15 of each year, a non-collecting retailer must also provide the Rhode Island Division of Taxation with a certain annual attestation that its notice requirements were fulfilled (Advisory for Tax Professionals, ADV 2018-03, Rhode Island Division of Taxation, January 11, 2018).


The Washington Department of Revenue has issued revised economic nexus thresholds for state business and occupation (B&O) tax purposes. When the cumulative percentage change in the consumer price index for all urban consumers changes by 5% or more from the date the thresholds were last adjusted, the Department must adjust the thresholds to reflect the change. Effective January 1, 2018, economic nexus for Washington B&O tax purposes is extended to persons engaged in retail sales as long as the person has more than $285,000 (previously $267,000) in receipts from Washington, more than $57,000 (previously $53,000) in property or payroll in the state, or at least 25 percent of the person’s total property, payroll, or total receipts in Washington. The adjusted thresholds apply to tax periods beginning after the adjustments are made. This economic nexus test only applies if there is no physical presence in the state.  Retailers with inventory in 3rd party warehouses are subject to the B&O tax regardless of their sales amounts into the state. To see our previous news item on this topic, click here. (Excise Tax Advisory No. 3195.2017, Washington Dept. of Revenue)


On June 2, 2017, the Illinois Department of Revenue issued a general information letter in response to an inquiry about whether a taxpayer’s medical transcription service activities created nexus with Illinois, necessitating the payment of sales tax. For the medical transcription service, the taxpayer hired independent contractors who worked from home using their own equipment. The independent contractors performed work for customers in various states, including Illinois.


Sales tax is imposed in Illinois upon people “engaged in the business of selling tangible personal property to purchasers for use or consumption” (fully described in 86 Ill. Adm. Code 150.201(i)). In the letter, the Department of Revenue explained that, generally, if no tangible personal property is transferred, then a transaction is not subject to Retailers' Occupation Tax, Use Tax, Service Occupation Tax, or Service Use Tax. Since no tangible property is transferred in connection with the medical transcription services, no tax is due. 


Regarding the creation of nexus with Illinois, the department clarified the characteristics of an “Illinois retailer” and a retailer “maintaining a place of business” in Illinois. Such a retailer must collect and remit use tax to the state to conform with the retailer’s occupation tax act and use tax act.  Since there was no tax due, the Department did not give a definitive answer regarding nexus under the facts of using independent contractors to perform these services. (General Information Letter ST 17-0018-GIL, Illinois Department of Revenue, June 2, 2017).



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