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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:

 

Pennsylvania has enacted legislation requiring certain remote sellers, marketplace facilitators, and referrers to elect to either collect and remit Pennsylvania sales tax or comply with notice and reporting requirements. If any of the above do not collect and remit sales tax, they must notify purchasers regarding the sales and use tax, and report specified information regarding purchasers or remote sellers to the Pennsylvania Department of Revenue.

 

For purposes of the legislation, a "remote seller" is a person who does not maintain a place of business in Pennsylvania and who, through a forum, makes retail sales of tangible personal property that is subject to sales or use tax. Marketplace facilitators, marketplace sellers, referrers, and employees are not considered remote sellers. A "marketplace facilitator" is a person who facilitates retail sales of tangible personal property by listing or advertising tangible personal property for sale in any forum and either directly or indirectly through agreements/arrangements with third parties, collects payment from the purchaser and transmits payment to the seller. A "referrer" is a person, other than a person who prints or publishes a newspaper, who has an agreement/arrangement with a marketplace seller or remote seller to:

 

  • list or advertise for sale one or more products of a marketplace seller or remote seller;
  • receive consideration from the marketplace seller or remote seller from the sale offered in the listing or advertisement
  • transfer a purchaser to a marketplace seller, remote seller, or affiliated person to complete a sale.
  • does not collect a receipt from the purchaser for the sale.

 

“Referrer” includes a person that may also be a vendor. “Referrer” does not include a person who provides internet advertising services and does not provide the marketplace seller or remote seller’s shipping terms or advertise whether the marketplace seller or remote seller collects a sales or use tax. A "marketplace seller" is a person who has an agreement with a marketplace facilitator under which the marketplace facilitator facilitates sales for the marketplace seller.

 

By March 1, 2018 and June 1 of each calendar year thereafter (beginning June 1, 2019), remote sellers, marketplace facilitators, and referrers with aggregate sales of $10,000 or more in the previous 12-month period must elect to collect and remit Pennsylvania sales tax or comply with the notice and reporting requirements. The Department has not yet released information about making the election.

 

For marketplace facilitators, the election requirement applies to:

 

  • retail sales through the marketplace facilitator’s forum that are made by or on behalf of a marketplace seller that does not maintain a place of business in Pennsylvania; and
  • retail sales made by a marketplace facilitator on its own behalf, if the marketplace facilitator does not maintain a place of business in Pennsylvania.

 

For referrers, the election requirement applies only to retail sales:

 

  • directly resulting from a referral of a purchaser to a marketplace seller that does not maintain a place of business in Pennsylvania;
  • directly resulting from a referral of a purchaser to a remote seller; and
  • of the referrer's own products if the referrer does not maintain a place of business in Pennsylvania

 

Remote sellers and marketplace facilitators will be required to post a conspicuous notice on their forums to inform Pennsylvania purchasers that:

 

  • sales or use tax may be due in connection with the purchase and delivery;
  • Pennsylvania requires the purchaser to file a return if use tax is due; and
  • the notice is required under statute.

 

Remote sellers and marketplace facilitators must also provide writtent notice to purchasers at the time of sale that includes:

 

  • a statement that sales tax is not being collected in connection with the purchase;
  • a statement that the purchaser may be required to remit use tax directly to the Department of Revenue; and
  • instructions for obtaining additional information from the Department regarding whether and how to remit the use tax.

 

The notice must be prominently displayed on all invoices and order forms and on each sales receipt or similar document.

 

Referrers electing to comply with the notice requirements will be required to post a conspicuous notice on their platforms to inform Pennsylvania purchasers that:

 

  • sales or use tax may be due in connection with the purchase and delivery;
  • the person to whom the purchaser is being referred may or may not collect and remit sales tax to the Department of Revenue in connection with the transaction;
  • Pennsylvania requires the purchaser to file a return if use tax is due and is not collected by the person to whom the purchaser is being referred; and
  • the notice is required under statute.

 

The notice must also contain instructions for obtaining additional information from the Department regarding use tax.


By January 31 of each year, a remote seller or marketplace facilitator that elects to comply with notice and reporting requirements must provide a written report to each purchaser required to receive the notice. The report must include:

 

  • a statement that the remote seller or marketplace facilitator did not collect sales tax on the purchaser's transactions and that the purchaser may be required to remit use tax to the Department;
  • a list, by date, indicating the type and purchase price of each product purchased or leased by the purchaser from the remote seller or marketplace facilitator and delivered to a location within Pennsylvania;
  • instructions for obtaining additional information from the Department regarding whether and how to remit the use tax;
  • a statement that the remote seller or marketplace facilitator must submit a report to the department that includes the purchaser's name and the aggregate dollar amount of the purchases made from the remote seller or marketplace facilitator; and
  • additional information as required by the department.

 

By January 31 of each year, remote sellers and marketplace facilitators that elect to comply with notice and reporting requirements must also provide a written report to the Department of Revenue. For each purchaser required to receive the notice during the previous calendar year, the report must include:

 

  • the purchaser's name;
  • the purchaser's billing address and, if different, the purchaser's last know mailing address;
  • the address in Pennsylvania where products were delivered to the purchaser;
  • the aggregate dollar amount of purchases that the purchaser made from the remote seller or marketplace facilitator; and
  • the name and address of the remote seller, marketplace facilitator, or marketplace seller that made the sales to the purchaser.

 

By January 31 of each year, a referrer that elects to comply with notice and reporting requirements must provide a written report to each remote seller to whom the referrer transferred a potential purchaser located in Pennsylvania during the previous calendar year. The report must include:

 

  • a statement that Pennsylvania may impose sales or use tax on the transaction;
  • a statement that the remote seller may be required to elect to either collect and remit the sales and use tax or comply with notice and reporting requirements; and
  • instructions for obtaining additional information regarding sales and use tax from the Department.

 

By January 31 of each year, referrers must also provide a report to the Department containing a list of remote sellers who received the notice described above.

 

The notice requirements and requirements for providing reports to the Department of Revenue:

 

  • are effective February 1, 2018, and will apply beginning on April 1, 2018, for sales of products and services other than digital products and related services; and
  • are effective February 1, 2019 and will apply beginning on April 1, 2018, for digital products and related services.

 

Penalties for non-compliance with the notice and reporting provisions will be $20,000 or 20% of the total sales in Pennsylvania during the previous twelve months, whichever is less, against a remote seller, marketplace facilitator or referrer that makes an election to comply with the notice and reporting requirements or is deemed to have made such election and fails to comply.  The penalty shall be assessed separately for each violation but may only be assessed once in a calendar year.  For a period of five years after the effective date, the Department may abate or reduce the penalty due to hardship or for good cause.

 

A positive provision in the bill prohibits the filing of a class action against a marketplace facilitator or a referrer on behalf of purchasers related to an overpayment of sales or use tax collected by the facilitator or referrer, regardless of whether such action is characterized as a tax refund claim.  Purchasers will retain their right to file for a tax refund from the Department.

 

If federal legislation relating to remote sellers has not been enacted by December 31, 2018, the Independent Fiscal Office, in conjunction with the Department, shall conduct a study assessing the legal implications and fiscal impact of mandating notice requirements for remote sellers. (Act 43 (H.B. 542), Laws 2017)

(11/20/2017)

Effective December 1, 2017, Mississippi has adopted a rule stating that sellers who lack physical presence nexus in Mississippi but who are purposefully or systematically exploiting the Mississippi market have a substantial economic presence for use tax purposes if their sales into the state exceed $250,000 for the prior twelve months. These sellers are required to register with the Department of Revenue in order to collect and remit use tax. The tax must be stated separately from the sales price on invoices and accounted for separately on the seller’s records. 

 

Purposefully or systematically exploiting the Mississippi market includes the following:

 

  • Television or radio advertising on a Mississippi station;
  • Telemarketing to Mississippi customers;
  • Advertising on billboards, wallscapes, bus benches, interiors and exteriors of buses, or other signage located in Mississippi;
  • Advertising in Mississippi newspapers, magazines, or other print media;
  • Emails, texts, tweets and any form of messaging directed to a Mississippi customer;
  • Online banner, text, or pop up advertising directed toward Mississippi customers;
  • Advertising to Mississippi customers through applications ("apps" ) or other electronic means on customer’s phones or other devices; or
  • Direct mail marketing to Mississippi customers.

 

Any seller who has collected and not remitted Mississippi tax on sales made before December 1, 2017 would still be liable for any tax collected. (Rule 35.IV.3.09, Mississippi Department of Revenue)

(11/20/2017)

Rhode Island’s Fiscal Year 2018 budget bill contains a provision requiring the Tax Administrator to establish a tax amnesty program open to all taxpayers who are delinquent on any Rhode Island state taxes. The amnesty program will take place from December 1, 2017 to February 15, 2018. The amnesty program applies to any taxable period ending on or before December 31, 2016. For qualified taxpayers, the Tax Administrator generally will not seek civil or criminal prosecution, will waive penalties, and will reduce the applicable interest rate by 25% (e.g. the 2016 interest rate of 18% would be reduced to 13.5%). The amnesty program will be open to any taxpayer who pays the tax and interest due upon filing the amnesty tax return, or who enters into a short-term installment payment agreement for reasons of financial hardship. The Rhode Island Division of Taxation will post the application form for the amnesty program. Amnesty will not be granted to taxpayers who are under any criminal investigation or are a party to any civil or criminal proceeding, pending in any court of the United States or the state of Rhode Island, for fraud in relation to any state tax imposed by the law of the state and collected by the tax administrator. (H.B. 5175, Laws 2017)

(09/28/2017)

On August 3, 2017, Rhode Island enacted affiliate and economic nexus with an alternative reporting requirement structure for those remote sellers that do not collect Rhode Island tax. Per the enacted legislation, the existence and/or presence of a non-collecting retailer's, referrer's, or retail sale facilitator's in-state software on the devices of in-state customers constitutes physical presence in Rhode Island under Quill. Other activities that will constitute nexus in the state include:

 

  • use in-state software to make sales at retail of taxable goods/services;
  • sell, lease, deliver, or participate in any activity relating to the sale, lease, or delivery of taxable goods/services, including: use of a referrer, retail sale facilitator, or other third party for direct response marketing or referral;
  • use of a sales process including listing, branding, selling, soliciting, processing, fulfilling, or exchanging;
  • offer taxable goods/services for sale through retail sale facilitators; or
  • are related to a person with physical presence in Rhode Island.

 

A remote seller who satisfies the economic activity threshold has the option to collect tax or comply with the reporting requirement.  The economic threshold activities are defined as:

 

  • Has gross revenue from the sale of tangible personal property, prewritten computer software delivered electronically or by load and leave, and/or has taxable services delivered into Rhode Island equal to or exceeding $100,000; or
  • Has sold tangible personal property, prewritten computer software delivered electronically or by load and leave, and/or taxable services for delivery into Rhode Island in 200 or more separate transactions.

 

“In-state software” is defined as “software used by in-state customers on their computers, smartphones, and other electronic and/or communication devices, including information or  software such as cached files, cached software, or 'cookies', or other data tracking tools, that are stored on property in this state or distributed within this state, for the purpose of purchasing tangible personal property, prewritten computer software delivered electronically or by load and leave, and/or taxable services.”

 

Beginning on August 17, 2017, and for each tax year thereafter, a non-collecting retailer shall either register to make sales at retail and collect and remit sales and use tax on all taxable sales into the state or:

 

  • Post a conspicuous notice on its website that informs in-state customers that sales or use tax is due on certain purchases made from the non-collecting retailer and that Rhode Island requires the in-state customer to file a sales or use tax return;
  • At the time of purchase, notify in-state customers that sales or use tax is due on taxable purchases made from the non-collecting retailer and that Rhode Island requires the in-state customer to file a sales or use tax return;
  • Within 48 hours of the time of purchase, notify in-state customers in writing that sales or use tax is due on taxable purchases made from the non-collecting retailer and that Rhode Island requires the in-state customer to file a sales or use tax return reflecting said purchase;
  • On or before January 31 of each year, including January 31, 2018, for purchases made in calendar year 2017, send a written notice to all in-state customers who have cumulative annual taxable purchases from the non-collecting retailer totaling $100 or more for the prior calendar year. The notification shall show the name of the non-collecting retailer, the total amount paid by the in-state customer to the non-collecting retailer in the previous calendar year, and, if available, the dates of purchases, the dollar amount of each purchase, and the category or type of the purchase, including, whether the purchase is exempt or not exempt from taxation in Rhode Island; and
  • Beginning on February 15, 2018, and not later than each February 15 thereafter, a non-collecting retailer that has not registered in Rhode Island for a permit to make sales at retail and collect and remit sales and use tax on all taxable sales into the state for any portion of the prior calendar year, shall file with the division on such form and/or in such format as the division prescribes an attestation that the non-collecting retailer has complied with the above requirements

 

At such time during any calendar year, or any portion thereof, that a referrer receives more than $10,000 from fees, commissions, and/or other compensation paid to it by retailers with whom it has a contract or agreement to list and/or advertise  for sale tangible personal property, prewritten computer software delivered electronically or by  load and leave, and/or taxable services, the referrer shall within 30 days provide written notice to all such retailers that the retailers' sales may be subject to this state's sales and use tax.

 

Beginning January 15, 2018, and each year thereafter, a retail sale facilitator shall provide the division of taxation with:

 

  • A list of names and addresses of the retailers for whom during the prior calendar year the retail sale facilitator collected Rhode Island sales and use tax; and
  • A list of names and addresses of the retailers who during the prior calendar year used the retail sale facilitator to serve in-state customers but for whom the retail sale facilitator did not collect Rhode Island sales and use tax.

 

There are exemptions for referrers and retail sale facilitators that have been provided within 90 days of the date of sale either a copy of the retailer's Rhode Island sales tax permit or its resale certificate, or evidence of a fully completed Rhode Island or Streamlined agreement sales and use tax exemption certificate.

 

Any non-collecting retailer, referrer, or retail sale facilitator that fails to comply with any of the above requirements shall be subject to a penalty of $10 for each such failure, but not less than a total penalty of $10,000 per calendar year. Each instance of failing to comply with the requirements shall constitute a separate violation for purposes of calculating the penalty. (Ch. 302 (H.B. 5175), Laws 2017)

(08/14/2017)

Washington has enacted legislation that creates marketplace nexus and reporting requirements provisions and expands the state’s economic nexus provision. Effective January 1, 2018, remote sellers, referrers and marketplace facilitators must elect to either collect and remit Washington sales or use tax on taxable sales into Washington or comply with notice and reporting requirements. The requirements apply to remote sellers or marketplace facilitators with gross receipts from retail sales sourced to Washington in the current or preceding calendar year of at least $10,000. A referrer is subject to the requirements if during the current or immediately preceding calendar year, gross business income received from referral services apportioned to Washington, whether or not they are subject to sales and use tax, and from retail sales sourced to Washington, if any, is at least $267,000. This is in addition to its Click Through and Affiliate nexus provisions which were passed in 2015. Until January 1, 2020, the requirements do not apply with respect to the retail sale of digital products and digital codes, other than specified digital products and digital games and digital codes used to redeem specified digital products and digital games, by a marketplace seller through a marketplace facilitator or directly resulting from a referral.

 

If the election is to comply with the notice and reporting requirements, a seller, other than a referrer acting in its capacity as a referrer, subject to the notice and reporting requirements of this section must post a conspicuous notice on its marketplace, platform, web site, catalog, or any other similar medium that informs Washington purchasers that:

 

  • Sales or use tax is due on certain purchases;
  • Washington requires the purchaser to file a use tax return; and
  • The notice is provided under the requirements of the legislation. 

 

The seller must provide a notice to each consumer at the time of each retail sale that must include the following information:

 

  • A statement that neither sales nor use tax is being collected or remitted upon the sale;
  • A statement that the consumer may be required to remit sales or use tax directly to the Washington State Department of Revenue (department); and
  • Instructions for obtaining additional information from the department regarding whether and how to remit the sales or use tax to the department.

 

The notice must be prominently displayed on all invoices and order forms including, where applicable, electronic and catalog invoices and order forms, and upon each sales receipt or similar document provided to the purchaser, whether in paper or electronic form.Sellers subject to the notice and reporting requirementsmust also provide an annual report no later than February 28 of each year to each Washington purchaser stating that the seller did not collect sales or use tax on sales and that the consumer may be required to remit such tax directly to the department and including details on the purchaser’s transactions. This must be sent for first class mail if a billing or shipping address is known and if not known then via email. An annual report must also be filed with the department by February 28 of each year that includes purchasers’ information (including billing and shipping addresses and total dollar amount of the purchases) and an affidavit from a seller’s officer affirming that reasonable efforts were made to comply with notice requirements.

 

A referrer subject to the notice and reporting requirementsmust post a conspicuous notice on its platform informing Washington purchasers that:

 

  • sales or use tax is due on certain purchases;
  • the seller may or may not collect and remit retail sales tax on a purchase;
  • Washington requires the purchaser to file a use tax return if retail sales tax is not assessed at the time of a taxable sale by the seller;
  • the notice is provided under the requirements of the legislation. 

 

A referrer must send a notice by February 28 of each year to each marketplace seller to whom the referrer transferred a potential purchaser located in Washington during the previous year. The notice must state that the seller must collect and remit retail sales or use tax on all taxable retail sales sourced to Washingtonor comply with notice requirements. A referrer must also submit an annual report to the department by February 28 of each year that includes a list of sellers who received notice and an affidavit from a referrer’s officer stating that the referrer made reasonable efforts to comply with notice and reporting requirements.

 

The department MUST assess a penalty of $20,000 in addition to any other penalties against any seller, other than a referrer acting in its capacity as a referrer, or to a referrer that fails to provide notice to consumers on each order and on their marketing and sales materials.  This penalty can be assessed once per year regardless of the number of notices a seller fails to provide.  Additional penalties ranging from $5,000 to $100,000 plus $20,000 for each $50,000 in sales above $300,000 in sales for failure to issue the annual notice to consumers must be assessed.  The penalty for failure to provide the annual statement to the Department will be assessed at $25 per consumer not included in the report with a minimum penalty of $20,000.  All these penalties are cumulative and interest will accrue on the penalties.  It is apparent that Washington is “encouraging” registration and collection in lieu of the notice option by imposing such harsh penalties for non-compliance.  There are provisions for a conditional waiver of penalties if the seller enters into an agreement with the state to come into compliance with the provisions as well as some limited penalty relief due to circumstances beyond the seller’s control or due to reasonable cause and not willful neglect.  There are also provisions for personal liability related to the tax for a variety of reasons (including accepting an invalid exemption certificate) – not just related to the new remote seller provisions.

 

A positive component of the bill is a limitation on class action lawsuits against retailers related to the collection of sales tax.  Consumers still have rights to file refunds directly with the department.   

 

Beginning July 1 2017, economic nexus for Washington business and occupation (B&O) tax purposes is extended to persons engaged in retail sales as long as the person has more than $267,000 in receipts from Washington, more than $53,000 property or payroll in the state, or at least 25 percent of the person’s total property, payroll, or total receipts in Washington. A person who has a substantial nexus with Washington in the current calendar year based solely on the person's property, payroll, or receipts in Washington during the current calendar year, is subject to the B&O tax imposed for the current calendar year only on business activity occurring on and after the date that the person established a substantial nexus with Washington in the current calendar year. For our previous news item on Washington’s economic nexus provisions, see Washington Enacts Click-Through and Economic Nexus Provisions. (H.B. 2163, Laws 2017)

(07/26/2017)

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