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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 June 12, 2017, Rep. Jim Sensenbrenner (R-WI) and House Judiciary Chairman Bob Goodlatte (R-VA) introduced the No Regulation Without Representation Act of 2017. A previous version of this bill had been introduced in 2016 and failed to pass. Under the proposed bill, a State may tax or regulate a person’s activity in interstate commerce only when such person is physically present in the State during the period in which the tax or regulation is imposed. Under the proposed bill, the physical presencerequirement would apply to sales and use taxand net income and other business activities taxes, as well as the states’ ability to regulateinterstate commerce. “Physical presence” in a state includes:

 

  • maintaining a commercial or legal domicile in the state;
  • owning, holding a leasehold interest in, or maintaining real property such as an office, retail store, warehouse, distribution center, manufacturing operation, or assembly facility in the state;
  • leasing or owning tangible personal property (other than computer software) of more than de minimis value in the state;
  • having one or more employees, agents or independent contractors present in the state who provide on-site design, installation, or repair services on behalf of the remote seller;
  • having one or more employees, exclusive agents or exclusive independent contractors present in the state who engage in activities that substantially assist the person to establish or maintain a market in the state; or
  • regularly employing in the state three or more employees for any purpose.

 

“Physical presence” in a state would not include:

 

  • entering into an agreement under which a person, for a commission or other consideration, directly or indirectly refers potential purchasers to a person outside the state, whether by an Internet-based link or platform, Internet Web site or otherwise;
  • any presence in a state for less than 15 days in a taxable year (or a greater number of days if provided by state law);
  • product placement, setup or other services offered in connection with delivery of products by an interstate or in-state carrier or other service provider;
  • Internet advertising services provided by in-state residents which are not exclusively directed towards, or do not solicit exclusively, in-state customers;
  • ownership by a person outside the state of an interest in a limited liability company or similar entity organized or with a physical presence in the state;
  • the furnishing of information to customers or affiliates in such state, or the coverage of events or other gathering of information in such state by such person, or his representative, which information is used or disseminated from a point outside the state; or
  • business activities directly relating to such person's potential or actual purchase of goods or services within the State if the final decision to purchase is made outside the state.

 

In addition, the bill prohibits the imposition or assessment of a sales, use or other similar tax or a reporting requirement unless the purchaser or seller has physical presence in the state.  This would prohibit all the remote seller legislation (click through, affiliate, economic, marketplace and reporting/notification). If enacted, the legislation would apply with respect to calendar quarters beginning on or after January 1, 2018. (No Regulation Without Representation Act of 2017)

(07/12/2017)

Effective October 1, 2017, Maine’s legislature has enacted legislation requiring remote sellers to collect and remit sales tax on sales of tangible personal property, products transferred electronically or services that are delivered into Maine, if:

 

  • The seller’s gross revenue from such sales into Maine in the previous calendar year or current calendar year exceeds $100,000; or
  • The seller made such sales into Maine in at least 200 separate transactions in the previous calendar year or the current calendar year.

 

The state may bring a declaratory judgment action against remote sellers to establish the federal and state legal validity of the tax collection obligation. The obligation to collect and remit the sales and use tax required by the legislation may not be applied retroactively. If an injunction against the legislation is lifted, the obligation to collect sales and use tax applies from that date forward for persons covered by the injunction. The legislature overrode the Governor’s veto of the legislation. We expect litigation challenging the law to be filed as has happened in other states. (L.D. 1405 (S.P. 483), Laws 2017)

(07/12/2017)

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.

 

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)

(06/08/2017)

Oklahoma has enacted legislation directing the Oklahoma Tax Commission to establish a tax amnesty program that will run from September 1, 2017 through November 30, 2017. Eligible taxes include sales and use, mixed beverage, gasoline and diesel, gross production and petroleum excise, corporate and personal income, and personal withholding tax. Eligible taxpayers would be entitled to a waiver of penalty, interest, or other collection fees due on the eligible taxes if the they voluntarily file returns and pay taxes due during the course of the amnesty program. The lookback period for which additional taxes may be assessed will be limited to three taxable years for annually filed taxes or 36 months for taxes that do not have an annual filing frequency. To be eligible to participate, taxpayers must:

 

  • Not have outstanding tax liabilities other than those reported pursuant to this initiative;
  • Not have been contacted by the Oklahoma Tax Commission, or third party acting on behalf of the Commission, with respect to the taxpayer's potential or actual obligation to file a return or make a payment to the state;
  • Not have collected taxes from others, such as sales and use taxes or payroll taxes, and not reported those taxes; and
  • Not have, within the preceding three years, entered into a voluntary disclosure agreement for the type of tax owed

 

Taxpayers who meet all of the above qualifications, except those who have collected taxes from others, such as sales and use taxes or payroll taxes, and not reported those taxes, may enter into a modified voluntary disclosure agreement. The provisions of a modified voluntary disclosure agreement would be the same as a voluntary disclosure agreement except the waiver of interest shall not apply except as may be optionally granted at the discretion of the Tax Commission, and the period for which taxes must be reported and remitted or assessed is extended beyond the three year or thirty six month lookback period to include all periods in which tax has been collected but not remitted. (H.B. 2380, Laws 2017, effective July 1, 2017)

(06/05/2017)

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)

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