Stay up to date with sales tax: Join our mailing list!


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:

 

Effective July 1, 2017, Indiana has enacted economic nexus legislation affecting remote sellers. Sellers that do not have a physical presence in Indiana will be required to collect and remit Indiana sales tax and comply with the procedures and requirements of Indiana’s sales tax laws if the seller meets either of the following criteria for the calendar year in which the retail transaction is made or for the calendar year preceding the calendar year in which the retail transaction is made:

 

  • The seller’s gross revenue from any combination of sales of tangible personal property delivered into Indiana, a product transferred electronically into Indiana, or a service delivered in Indiana exceeds $100,000; or
  • The seller sells any combination of tangible personal property delivered into Indiana, a product transferred electronically into Indiana, or a service delivered in Indiana in 200 or more separate transactions. 

 

The Indiana Department of Revenue may bring a declaratory judgment action against a remote seller to establish that the person has an obligation to collect Indiana sales tax and that the person’s obligation to collect Indiana sales tax is valid under state and federal law. The department and other state agencies and state entities may not, during the pendency of the declaratory judgment action - including any appeals from a judgment in the declaratory judgment action - enforce the obligation to collect Indiana sales tax against any person that does not affirmatively consent or otherwise remit the sales tax on a voluntary basis. The latter does not apply to a person if there is a previous judgment from a court establishing the validity of the obligation to collect state gross retail tax with respect to that person.

 

Included in the statute is an explanation for the enactment of the remote seller collection provisions with a plea to the U.S. Supreme Court to reconsider its doctrine that prevents states from requiring remote sellers to collect the tax.  It also claims that the non collection of the tax by remote sellers causes significant harm to the state of Indiana. (H.B. 1129, Laws 2017, effective July 1, 2017)

(05/09/2017)

On April 27, 2017, a bipartisan group of senators introduced the Marketplace Fairness Act of 2017 (MFA). Similar legislation was introduced in both 2013 and 2015 and failed to be enacted both times. If enacted, the legislation would authorize states meeting certain requirements to require remote sellers that do not meet a "small seller exception" to collect their state and local sales and use taxes. The small seller exception is set again at $1 million of remote sales annually. The only other significant change from the 2015 version is a prohibition of making the effective date during the 4th quarter of the calendar year. For information on the previous versions of the bill, visit Senate Introduces Marketplace Fairness Act of 2015.  

 

On April 27, 2017, a bipartisan group of lawmakers introduced the Remote Transactions Parity Act (RTPA) of 2017. Similar legislation was introduced in 2015 but failed to be enacted. Like the MFA, the legislation would also create sales and use tax collection obligations for remote sellers, but has some differences and additional provisions. Some key differences from the Marketplace Fairness Act include a different definition of a small seller.  The RTPA has a phased in threshold starting at $10million in year one, then $5million, then $1million.  In year 4, there is no threshold.  In addition to the monetary thresholds, any seller that sells on an electronic marketplace is considered a small seller.  A difference from the 2015 version of the bill is an inclusion of a definition of remote seller which specifies when a company is NOT a remote seller which includes physical presences for more than 15 days in a state, leasing or owning real property and using an agent to establish or maintain the market in a state if the agent does not perform business services in the state for any other person during the taxable year.  For more information on the Remote Transaction Parity Act of 2015, visit House Introduces Remote Transactions Parity Act of 2015. (Marketplace Fairness Act of 2017, Remote Transactions Parity Act of 2017)

(05/04/2017)

On April 3, 2017, the Massachusetts Department of Revenue issued a directive with economic nexus provisions for out-of-state internet sellers. It adopts an administrative bright line rule, instead of applying sales and use tax collection requirements on a case by case basis. Per the directive, an internet seller with a principal place of business located outside the state is required to register, collect and remit Massachusetts sales or use tax on sales into the state as follows:

 

  • For the period of July 1, 2017 to December 31, 2017, if during the preceding 12 months (July 1, 2016 - June 30, 2017), it had in excess of $500,000 in Massachusetts sales and made sales for delivery into Massachusetts in 100 or more transactions.
  • For each calendar year beginning with 2018, if during the preceding calendar year it had in excess of $500,000 in Massachusetts sales and made sales for delivery into Massachusetts in 100 or more transactions. 

 

The directive discusses Quill Corp. v. North Dakota and states that internet sellers with significant Massachusetts sales meets the statutory and constitutional standards that apply for purposes of the imposition of the commonwealth’s sales or use tax collection duty. In its discussion of what constitutes substantial physical presence under the Commerce Clause, the Directive distinguishes Large Internet Vendors from mail order vendors.  Specifically, it considers software, apps and cookies that are typically used by internet sellers to be tangible personal property owned by the seller as substantial physical presence in the state.  In addition, they consider Content Distribution Networks (CDN) providers that may be located in the state of Massachusetts to be performing local activities “on behalf of the vendor that are significantly associated with the vendor’s ability to establish and maintain a market” for its sales. When that activity takes place in Massachusetts it establishes an instate physical presence on behalf of such vendor.

 

Large Internet vendors may also utilize other persons as instate representatives that result in the creation of an instate physical presence. For example, large Internet vendors commonly sell goods through “online marketplaces.”  These online marketplaces, which offer a range of potential services through employees or other contract personnel, benefit the client/vendor by, among other things, enhancing its name recognition and creating consumer confidence with respect to its products. These arrangements may vary in form. Many of these agreements allow the Internet vendor to post goods for sale on a website operated by the online marketplace, with orders and payment then processed through that website (with subsequent order fulfillment completed by the individual Internet vendor). Other agreements may provide for increased services by the employees or other personnel of the online marketplace, which may include order fulfillment, return processing, access to the online marketplace’s customer service team, and the preparation of sales reports or other analytics. In either instance, although the website maintained by the online marketplace on which the vendor’s products are sold is “virtual,” some of the various services provided by the online marketplace in connection with the sale of the vendor’s products will be physical in nature.  Because these latter, physical services operate to establish and maintain the Internet vendor’s market, these services, when performed in the state, will result in an Instate physical presence on the part of such vendor. 

 

Also, large Internet vendors may utilize delivery services that exceed the type of delivery services that were evaluated by Quill. Quill held that a state could not impose a sales or use tax collection duty on vendors that limit their contacts with the state to the contacts of mail and common carrier. In contrast, large Internet vendors may utilize delivery services that provide not merely product delivery, but additional services that may include logistics, order fulfillment, storage, return processing and order management. In general, these additional services operate to enhance the vendor’s sales. Therefore, these services, when performed in the state, will result in an instate physical presence on the part of such vendor. 

 

This is an expansive definition of substantial physical presence defined not through the legislative process but through a Department of Revenue Directive.  The Department is making this a prospective position.  It is very likely this will be challenged as economic nexus provisions in other states.  We will monitor and update this news items with developments. (Directive 17-1: Requirement that Out-of-State Internet Vendors with Significant Massachusetts Sales Must Collect Sales or Use Tax, April 3, 2017)

(04/17/2017)

North Dakota has enacted economic nexus legislation applicable to remote sellers. Sellers that do not have a physical presence in North Dakota will be required to collect and remit North Dakota sales or use tax if the seller meets either of the following criteria in the previous or current calendar year: 

 

  • The seller’s gross sales from the sale of tangible personal property and other taxable items delivered in North Dakota exceed $100,000, or
  • The seller sold tangible personal property and other taxable items for delivery in North Dakota in 200 or more separate transactions.

 

The seller shall follow all applicable procedures and requirements of law as if the seller has a physical presence in North Dakota. Note that the legislation will become effective on the date the U.S. Supreme Court issues an opinion overturning Quill v. North Dakota, or otherwise confirming a state may constitutionally impose its sales or use tax upon an out-of-state seller in circumstances similar to those specified in the North Dakota legislation. (S.B. 2298, Laws 2017)

(04/17/2017)

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)

Pages

Scroll to Top