D.C. Passes Economic and Marketplace Nexus Legislation

Effective Date: January 1, 2019 for economic nexus (made permanent on January 18, 2019 and is effective after a 30-day congressional review period); April 1, 2019 for marketplace nexus

Threshold: $100,000 or 200 or more separate retail sales

Measurement Date: Previous or current calendar year

Includable Transactions: Retail sales

When You Need to Register Once You Exceed the Threshold: Next transaction (not specified by District)

The District of Columbia has proposed economic nexus legislation that would require remote sellers to collect sales tax on sales into the U.S. capital if they exceed an economic threshold. The purpose of the B22-0914, the “Internet Sales Tax Amendment Act,” is to amend D.C. code to require that internet sales tax be collected from online retailers, to direct generated revenues to lower the commercial property tax rate.

A remote seller is required to collect and remit sales tax if the seller meets either of the following criteria in the previous calendar year or current calendar year:

  • The seller’s annual gross revenue from the sale of tangible personal property, any product transferred electronically, or services delivered into the District of Columbia exceeds $100,000; or
  • The seller sold tangible personal property, any product transferred electronically, or services for delivery in the District of Columbia in 200 or more separate transactions in a 12-month period.

D.C. will not enforce these provisions retroactively before the effective date of the act. The act will take effect following the approval of the D.C. Mayor, a 30-day period of congressional review, and publication in the District of Columbia Register.

The D.C. Committee on Finance and Revenue held a public hearing on October 10, 2018 to present the act and allow individuals to testify. We are monitoring closely for an additional activity. (B22-0914 – Internet Sales Tax Amendment Act of 2018, introduced July 9, 2018)

UPDATE: Following a first reading of B22-0914 on November 13 and granting the bill preliminary approval, the D.C. Council gave their final approval of the post-Wayfair emergency legislation on December 4, 2018. The bill targets January 1, 2019 as the enforcement date for remote seller sales tax collection. To become law, the bill must be signed by the D.C. Mayor and sent to Congress for a period of 30 days for approval. We will be watching this approval process closely. For more information, you can visit the Council’s B22-0914 legislation tracking page.

UPDATE: B22-1070 was enacted as Act A22-0556 on December 31, 2018. The act establishes an economic nexus threshold for remote seller making sales into D.C. Remote retailers must collect and remit sales tax if, in the previous or current calendar year, more than $100,000 in gross receipts or 200 or more separate retail sales and delivered into the District, effective January 1, 2019. The Act also requires marketplace facilitators to collect sales tax on behalf of their sellers, effective April 1, 2019 and taxes digital goods. Act A22-0556 is an emergency act and expires on March 31, 2019, but will likely be made permanent in the future. For more information, read the D.C. Office of Tax Revenue’s Notice 2019-02 on the new rules and the Wayfair decision.

UPDATE: The District of Columbia has passed permanent legislation containing the provisions for economic and marketplace nexus and taxation of digital goods. The permanent legislation was approved on January 18, 2019 and is effective after a 30-day congressional review period. (Act 22-584 (D.C.B. 22-914), Laws 2017)

Posted on October 29, 2018