Idaho Enacts Economic and Marketplace Nexus Legislation

Effective Date: June 1, 2019

Threshold: $100,000

Measurement Date: Previous or current calendar year

Includable Transactions: Gross sales

When You Need to Register Once You Exceed the Threshold: Next transaction (state doesn’t specify)

Idaho has enacted legislation with economic nexus and marketplace nexus provisions, effective June 1, 2019. Any retailer without a physical presence in Idaho that has, in the previous calendar year or the current calendar year, cumulative gross receipts from sales delivered into Idaho in excess of $100,000 is required collect and remit Idaho state-level sales and tax, but not local taxes.

Per the legislation, marketplace facilitators without a physical presence in Idaho are required to collect and remit Idaho state-level sales and tax on retail sales they facilitate once the combined total of its own sales and any sales it facilitates for retailers or authorized agents of the retailer exceeds $100,000.

A marketplace facilitator that has physical presence in Idaho but has not previously facilitated a retail sale in the state will have 45 days to comply with these provisions upon completion of the marketplace facilitator’s first facilitated retail sale in Idaho.

A marketplace facilitator is not liable for failure to file, collect, and remit sales and use taxes if the marketplace facilitator demonstrates that the error was due to incorrect or insufficient information provided by the retailer or an authorized agent of the retailer. This does not apply if the marketplace facilitator and the retailer or authorized agent of the retailer are related parties.

A class action lawsuit may not be brought against a marketplace facilitator in Idaho that arises from or is in any way related to an overpayment of sales or use tax collected on sales facilitated by the marketplace facilitator, regardless of whether the claim is characterized as a tax refund claim. The state tax commission may waive penalties and interest if a marketplace facilitator seeks liability relief and the state tax commission finds that a reasonable cause exists.

Marketplace facilitators must obtain a separate seller’s permit and collect and remit under that separate permit for state-level sales and use taxes collected on transactions facilitated for third-party sellers.

The legislation defines “marketplace facilitator” as a person that contracts with sellers to facilitate for consideration, including the deduction of fees from a transaction, the sale of the seller’s products through a physical or electronic marketplace operated by the person, and engages:

  • Directly or indirectly, through one or more affiliated persons, in any of the following:
    • Transmitting or otherwise communicating the offer or acceptance between the buyer and seller;
    • Owning or operating the infrastructure, electronic or physical, or the technology that brings buyers and sellers together;
    • Providing a virtual currency that buyers are allowed or required to use to purchase products from the seller; or
    • Software development or research and development activities related to any of the activities listed below, if the activities are directly related to a physical or electronic marketplace operated by the person or an affiliated person; and
  • In any of the following activities, with respect to the seller’s products:
    • Payment processing services;
    • Fulfillment or storage services;
    • Listing products for sale;
    • Setting prices;
    • Branding sales as those of the marketplace facilitator;
    • Taking orders; Advertising or promotion; or
    • Providing customer service or accepting or assisting with returns or exchanges.

Note that Idaho had previously enacted click-through nexus legislation effective July 1, 2018 pertaining to:

  • Any retailer that has an agreement, directly or indirectly, with one or more persons engaged in business in Idaho which, for a commission or other consideration, the persons refer potential purchasers to the retailer directly, whether by a link on an internet website, written or oral presentation, or otherwise; and
  • The cumulative gross receipts from sales by the retailer to purchasers who are referred by all retailers engaged in business in Idaho with such an agreement are greater than $10,000 during the immediately preceding 12 months.

For additional details on Idaho’s click-through nexus legislation, click here. For our previous news item on Idaho’s economic and marketplace nexus legislation, click here. (H.B. 259, Laws 2019)

UPDATE: The Idaho State Tax Commission has issued additional guidance regarding the enacted economic and marketplace nexus legislation. Per the guidance, a marketplace facilitator is a person that provides a marketplace for third-party sellers. A person is a marketplace facilitator if they meet all of these criteria:

  • You contract with third-party sellers to help them sell their products through a physical or electronic marketplace.
  • You receive consideration for performing the contract (consideration payment, benefit, or even deduction of fees from a transaction).
  • You engage, directly or indirectly, in any of the following:
    • With respect to the seller’s product you: Provide payment processing services; Provide fulfillment or storage services; List products for sale; set prices;  take orders; Brand sales as those of the marketplace facilitator’s; or Advertise, promote; or provide customer service (including help with returns or exchanges).
  • You provide any of the following directly or indirectly for the seller:
    • Transmit or communicate the offer or the acceptance of the offer between buyer and seller.
    • Own or operate the infrastructure (physical or electronic) or the technology that brings a buyer together with a seller.
    • Provide a virtual currency that buyers use to purchase products from sellers.
    • You or an affiliated person conduct software development or research and development if the activities are directly related to a physical or electronic marketplace you operate for third-party sellers.

If an individual makes sales in Idaho, they are required to collect Idaho sales tax on those sales if they have a physical presence in the state (whether permanent or temporary). “Physical presence” includes:

  • Having an office, warehouse, sales or sample room, or storage place
  • Maintaining a stock of goods
  • Renting or leasing property (other than real property) to a customer who uses the property in Idaho
  • Servicing tangible personal property in Idaho
  • Having a salesman, agent, or representative who comes to Idaho to sell, deliver, install, or take orders, regardless of whether the salesman, agent, or representative is your employee or lives in Idaho or another state.

Presence also can be established by the relationship of one business to another that’s doing business in Idaho.

The guidance also states that if an individual already has an Idaho seller’s permit, they may need to get an additional permit if they operate as a marketplace facilitator. (Online Sellers, Idaho State Tax Commission, May 1, 2019; Online Sellers – Explanation of Terms, Idaho State Tax Commission, May 1, 2019)

Posted on April 22, 2019