Minnesota Enacts Marketplace and Affiliate Nexus Legislation

Effective Date: October 1, 2018; October 1, 2019 for new thresholds

Threshold: $100,000 and 10 sales or 100 transactions; $100,000 or 200 or more retail sales – effective October 1, 2019

Measurement Date: The 12-month period ending on the last day of the most recently completed calendar quarter is

Includable Transactions: Retail sales; Marketplace sales included towards the threshold for individual sellers

When You Need to Register Once You Exceed the Threshold: On the first taxable retail sale into Minnesota that occurs no later than 60 days after you exceed the Small Seller Exception

Minnesota has enacted a number of sales and use tax nexus amendments, including marketplace nexus and affiliate nexus provisions. The state has amended the definition of “retailer maintaining a place of business in this state” to include a retailer who has storage in Minnesota, employs a Minnesota resident who works from a home office in Minnesota, has a marketplace provider or other third party operating in Minnesota under the retailer’s authority for any purpose, including facilitating and processing sales. A retailer is represented by a marketplace provider in Minnesota if the retailer makes sales in Minnesota facilitated by a marketplace provider that maintains a place of business in Minnesota.

“Marketplace provider” means any person who facilitates a retail sale by a retailer by:

• listing or advertising for sale by the retailer in any forum, taxable tangible personal property, services, or digital goods that are subject to tax under this chapter; and
• either directly or indirectly through agreements or arrangements with third parties collecting payment from the customer and transmitting that payment to the retailer regardless of whether the marketplace provider receives compensation or other consideration in exchange for its services.

A retailer with total taxable retail sales to customers in Minnesota of less than $10,000 in the 12-month period ending on the last day of the most recently completed calendar quarter is not required to collect and remit sales tax if it is determined to be a retailer maintaining a place of business in the state solely because it made sales through one or more marketplace providers. This provision does not apply to a retailer that is or was registered to collect sales and use tax in Minnesota.

A marketplace provider will be required to collect and remit sales and use taxes for all facilitated sales for a retailer, and will be subject to audit on the retail sales it facilitates unless either:

• the retailer provides a copy of the retailer’s registration to collect sales and use tax in Minnesota to the marketplace provider before the marketplace provider facilitates a sale; or
• upon inquiry by the marketplace provider or its agent, the commissioner discloses that the retailer is registered to collect sales and use taxes in this state.

A marketplace provider will not be liable for failure to file and collect and remit sales and use taxes if the marketplace provider demonstrates that the error was due to incorrect or insufficient information given to the marketplace provider by the retailer. This does not apply if the marketplace provider and the marketplace retailer are related parties.

Nexus is also established if a retailer who is a remote seller has an entity perform duties on its behalf which is considered affiliate nexus. Common ownership is not required. An entity is considered an affiliate of a retailer for nexus purposes if the entity:

• has the same or a similar business name as the retailer and sells, from a location or locations in Minnesota, taxable tangible personal property, digital goods, or services that are similar to those sold by the retailer;
• maintains an office, distribution facility, salesroom, warehouse, storage place, or other similar place of business in Minnesota to facilitate the delivery of tangible personal property, digital goods, or services sold by the retailer to its customers in Minnesota;
• maintains a place of business in Minnesota and uses trademarks, service marks, or trade names in Minnesota that are the same or substantially similar to those used by the retailer, and that use is done with the express or implied consent of the holder of the marks or names;
• delivers, installs, or assembles tangible personal property in Minnesota, or performs maintenance or repair services on tangible personal property in Minnesota, for tangible personal property sold by the retailer;
• facilitates the delivery of tangible personal property to customers of the retailer by allowing the customers to pick up tangible personal property sold by the retailer at a place of business the entity maintains in Minnesota; or
• shares management, business systems, business practices, or employees with the retailer, or engages in intercompany transactions with the retailer related to the activities that establish or maintain the retailer’s market in Minnesota.

Additionally, the requirement that, in order to be considered affiliated entities, the retailer and entity must be related parties is repealed.

As enacted in H 2546 in May 2014, Minnesota also states that to the extent allowed by the U.S. Constitution and the laws of the United States, a retailer making retail sales from outside Minnesota to a destination within Minnesota and not maintaining a place of business in Minnesota shall collect and remit sales and use taxes if the retailer engages in the regular or systematic soliciting of sales from potential customers in this state by:

• distribution, by mail or otherwise, of catalogs, periodicals, advertising flyers, or other written solicitations of business to customers in this state;
• display of advertisements on billboards or other outdoor advertising in this state;
• advertisements in newspapers published in this state;
• advertisements in trade journals or other periodicals the circulation of which is primarily within this state;
• advertisements in a Minnesota edition of a national or regional publication or a limited regional edition in which this state is included as part of a broader regional or national publication which are not placed in other geographically defined editions of the same issue of the same publication;
• advertisements in regional or national publications in an edition which is not by its contents geographically targeted to Minnesota but which is sold over the counter in Minnesota or by subscription to Minnesota residents; advertisements broadcast on a radio or television station located in Minnesota; or any other solicitation by telegraphy, telephone, computer database, cable, optic, microwave, or other communication system.

A retailer not maintaining a place of business in Minnesota is presumed, subject to rebuttal, to be engaged in regular solicitation within Minnesota if it engages in any of the activities listed above and:

• makes 100 or more retail sales from outside Minnesota to destinations in Minnesota during a period of 12 consecutive months; or
• makes 10 or more retail sales totaling more than $100,000 from outside Minnesota to destinations in Minnesota during a period of 12 consecutive months.

The marketplace and affiliate nexus amendments are effective on the earlier of July 1, 2019, or the date of a U.S. Supreme Court decision modifying its decision in Quill Corp. v. North Dakota, so that a state may require retailers without a physical presence in the state to collect and remit sales tax. However, if a federal law is enacted authorizing a state to impose a requirement to collect and remit sales tax on retailers without a physical presence in the state, the Commissioner of Revenue must enforce the nexus amendments to the extent allowed under federal law. (Ch. 1 (H.F. 1 a), First Special Session, Laws 2017)

UPDATE: The state has released a bulletin that they are evaluating the effective date – we will update as they release information.

UPDATE: Minnesota released another news bulletin saying that the Department of Revenue plans to announce sales tax enforcement date for remote sellers and marketplace providers on July 25. The DOR is also hosting and participating in an emergency governing board meeting for the Streamlined Sales Tax (SST) Governing Board on July 19 and 20, 2018 at its office in St. Paul.

UPDATE: Minnesota announced an October 1, 2018 effective date for their remote seller legislation, for more information visit the DOR’s Update for Remote Sellers page.

UPDATE: Minnesota has changed its thresholds for remote retailers and marketplace providers. Effective October 1, 2019, a remote retailers or marketplace provider must register to collect and remit sales tax if it:

(1) makes or facilitates 200 or more retail sales from outside this state to destinations in this state during the prior 12-month period; or

(2) makes or facilitates retail sales totaling more than $100,000 from outside this state to destinations in this state during the prior 12-month period.

If all retail sales into Minnesota combined – including sales made through any marketplace, your own website, and through other sources – exceed the thresholds, then sales tax must be collected and remitted to Minnesota. Individual sellers must collect and remit sales tax on taxable sales through their website and other sources. If the marketplace is not collecting Minnesota sales tax on sellers’ behalf, then a seller must also collect Minnesota sales tax on taxable sales made through that marketplace.