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Georgia has ruled that an out-of-state school book club is liable for Georgia sales and use tax on sales of books and educational materials made to in-state educators, parents and students via mail order and internet. The taxpayer did not have a physical presence in Georgia and was not registered to do business in Georgia. The taxpayer’s parent company and a subsidiary had a physical presence in Georgia and were registered to do business in Georgia. The taxpayer made sales via schoolteachers or parent educators, who would bring the taxpayer’s products to students’ attention, gather and place orders, distribute the purchased products and handle returns, complaints and refunds. Parents and students could make purchases online using a code provided by a teacher. The Georgia Tax Tribunal found that the taxpayer was a "dealer" because it solicited sales in Georgia by means of "representatives” (the schoolteachers and educators). Additionally, the taxpayer engaged in mail order sales and solicited a market in Georgia by targeting teachers, schools, and classrooms in-state via bonus point incentives and a teacher advisor program. The taxpayer was also considered a "dealer" since related members with a physical presence in Georgia sold the same or similar products under common trademarks, services marks, or trade names. The taxpayer contended that Georgia's imposition of a use tax violates the Commerce Clause since the taxpayer does not have substantial nexus with Georgia. The Tax Tribunal dismissed this since the taxpayer had substantial nexus in Georgia through its sole reliance on teachers and parent educators to market and sell its products. This case also challenged the Georgia affiliate nexus provisions that were passed in 2012. (Scholastic Book Clubs, Inc. v. Riley, Georgia Tax Tribunal, Docket No. 1552367, February 14, 2017)

(04/03/2017)

On March 22, 2017, Alabama Gov. Robert Bentley signed legislation authorizing the Alabama Department of Revenue (DOR) to require non-collecting remote sellers to report Alabama sales to the DOR and notify Alabama customers of their use tax obligations. The requirements would apply to out-of-state sellers who do not collect sales tax, use tax, or simplified sellers use tax on Alabama sales. Penalties can be assessed under the general penalty provisions.  Specific details regarding the nature of the reporting and penalties for non-compliance have not be released. The legislation is effective July 1, 2017. (Senate Bill 86 (Act 2017-82), Alabama Department of Revenue)

(03/27/2017)

On December 1, 2011, the Pennsylvania Department of Revenue issued a bulletin outlining remote seller activities that constitute nexus with the Commonwealth of Pennsylvania. Per the bulletin, if a remote seller has a contractual relationship with an entity or individual physically located in Pennsylvania whose website has a link that encourages purchasers to place orders with the remote seller, and the in-state entity or individual receives consideration for the relationship, the remote seller has nexus in Pennsylvania. Regularly soliciting orders from Pennsylvania customers via the website of an entity or individual physically located in Pennsylvania, such as via click-through technology also creates nexus. This is commonly referred to as “click-through” nexus. 

 

The bulletin also states that the following activities create nexus in Pennsylvania for remote sellers: 

 

  • Utilizing affiliates, agents and/or independent contractors located in Pennsylvania who provide repair, delivery or other services relating to tangible personal property sold by the remote seller to Pennsylvania customers.
  • Utilizing a remote seller’s affiliates, agents and/or independent contractors to provide services in Pennsylvania that benefit, support and/or complement the remote seller’s business activity.
  • Storing its property or the property of a representative at a distribution or fulfillment center located within Pennsylvania, regardless if the center also stores property of third parties that is distributed from the same location.

 

The bulletin states that the activities above constitute maintaining a place of business in Pennsylvania for remote sellers, thus creating nexus for them in the state and requiring them to collect sales tax on sales within Pennsylvania. The Department will enforce the provisions accordingly. (Pennsylvania Sales and Use Tax Bulletin 2011-01, issued December 1, 2011)

(12/05/2011)

Wyoming has enacted economic nexus legislation pertaining to remote sellers. Effective July 1, 2017, remote sellers without a physical presence in Wyoming are required to collect and remit sales tax on sales in the state once the seller meets either of the following requirements in the current calendar year or immediately preceding calendar year: 

 

  • The seller's gross revenue from the sale of tangible personal property, admissions or services delivered into Wyoming exceeds $100,000, or
  • The seller sold tangible personal property, admissions or services delivered into Wyoming in 200 or more separate transactions.

 

Notwithstanding other provisions of the law, the Wyoming Department of Revenue may bring an action to obtain a declaratory judgment that a seller is obligated to remit sales tax. This provision is similar to the South Dakota provisions which allows the state to initiate action against remote sellers that do not register to collect the tax.  Upon the filing of an action for declaratory judgment, the court shall grant an injunction prohibiting the enforcement of the collection against any seller that is party to the action.  We will monitor the courts for filing by remote sellers or the state and the impact on remote sellers.  It does appear that the injunction is only against sellers that are party to the action filed. The legislation also amends the definition of "vendor" to include a remote seller. (H.B. 19, Laws 2017, effective July 1, 2017)

 

UPDATE: On June 28, 2017, the trade associations American Catalog Mailers Association and NetChoice filed a lawsuit against the Wyoming Director of Revenue, challenging the constitutionality of the state’s economic nexus legislation. The American Catalog Mailers Association and NetChoice are challenging the legislation as being in violation of the Commerce Clause of the U.S. Constitution as interpreted by the Supreme Court in Quill v. North Dakota. The trade associations made attempts to convince Wyoming to suspend enforcement of the provision pending the decision in the South Dakota case on economic nexus but the state declined to voluntarily suspend enforcement of the economic nexus provisions.  The statute included provisions that prohibit the state from enforcing the obligation to collect Wyoming sales tax against any person that is party to the action upon the filing of an action for declaratory judgment.  This provision applies if the state files an action, it is unclear if the injunction will apply to this action automatically or if it will only apply to members of the two associations that filed the action.  We recommend that no company voluntarily elect to collect if their only presence in the state is under these economic nexus provisions.  We will continue to monitor for developments. (American Catalog Mailers Association and NetChoice v. Dan Noble, in his capacity as the Director of the Wyoming Department of Revenue)

 

UPDATE: The Wyoming Department of Revenue has announced that it will not enforce the economic nexus legislation, pending a legal action in which the Department is seeking a declaratory judgment from the Second Judicial District of the State of Wyoming. H.B. 19 prohibits the Department, during the pendency of the legal action, from enforcing the tax remittance obligations against any remote seller who does not consent to or otherwise remit sales tax on a voluntary basis. If a business only meets the requirement to license as a result of the economic nexus thresholds in H.B. 19, the Department cannot require the business to become licensed at this time. However, H.B. 19 does not bar a company from choosing to voluntarily license to collect and remit Wyoming sales tax. (Taxing Issues, Wyoming Department of Revenue, Excise Tax Division, Vol. 20, Quarter 3, September 2017)

(11/20/2017)

Virginia has amended its tax code regarding the nexus requirements for out-of-state businesses to collect and remit sales tax in the state. Effective July 1, 2017, the definition of dealer has been modified to include owning tangible personal property for sale that is located in the Commonwealth of Virginia.  This activity will create sufficient nexus to require out-of-state businesses to collect and remit Virginia sales tax on sales to customers in Virginia. (Ch. 51 (H.B. 2058), Laws 2017, effective July 1, 2017

(03/06/2017)

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