2020 Sales Tax Developments
Three months in and it’s already been a hectic year on many fronts; sales and use taxes have been no exception. Developments in 2020 so far include:
Alaska – While Alaska does not have a state level sales tax, certain local municipalities do. The Municipal League has finalized the uniform Alaska Remote Seller Sales Tax Code, which establishes a framework for administering local sales taxes on remote commerce.
Arizona revised its threshold for annual transaction privilege tax (TPT) electronic filing and paying. Effective Jan. 1, the threshold became $5,000, a change from the 2019 level of $10,000. Businesses with an annual TPT and use tax liability of $5,000 or more during the prior calendar year are now required to file and pay electronically starting in February for the January reporting period.
Those failing to electronically file and pay are subject to penalties of 5% of the tax amount due for filing a paper return (minimum penalty: $25) and/or 5% of the amount of payment made by check or cash.
Georgia will require marketplace facilitators to collect and remit sales tax on behalf of third-party sellers per a bill signed by the governor earlier this year. The measure takes effect April 1.
Hawaii now requires certain taxpayers, including general excise taxpayers whose liability exceeds $4,000 for the taxable year, to file returns electronically. General excise taxpayers whose annual liability exceeds $4,000 are required to file periodic returns monthly; the new requirement kicks in for periodic general excise tax returns for months beginning on or after July 1.
Annual returns for taxable years beginning on or after Jan. 1 will be required to be filed electronically. The state will levy a 2-percent penalty on the amount of tax required to be shown on the return if the return is not filed electronically unless the failure is due to “reasonable cause and not due to neglect.”
Hawaii also began requiring marketplace facilitators to collect and remit the tax due on all sales, including those by third-party or marketplace sellers, effective Jan. 1. Economic nexus is $100,000 or more in gross income sourced to Hawaii or at least 200 transactions with parties in the state.
Illinois began requiring certain marketplace facilitators to collect and remit the tax due on sales made through the platform in the state starting in January. A marketplace facilitator is considered the retailer of each sale of tangible personal property or taxable services made through the marketplace if: cumulative gross receipts from sales of tangible personal property or taxable services to purchasers in Illinois by the marketplace facilitator and its marketplace sellers are $100,000 or more or the marketplace facilitator and marketplace sellers cumulatively enter into 200 or more separate transactions for the sale of tangible personal property or taxable services into Illinois.
If a remote marketplace establishes economic nexus by meeting one or both thresholds, it must collect and remit Illinois sales and use tax for one year.
Louisiana’s Supreme Court has found Walmart free of obligation to collect and remit sales tax for its third-party sellers contrary to claims of authorities in the Parish of Jefferson. The case hinged on whether an online marketplace is obligated as a “dealer” under state regulations “and/or by contract to collect sales tax on the property sold by third–party retailers through the marketplace’s website.”
Michigan’s Marketplace Facilitator Law kicked in Jan. 1. Marketplace facilitators who make more than $100,000 in sales or at least 200 transactions in Michigan must collect sales tax on behalf of third-party sellers on their platform. Marketplaces that have adopted this law include Amazon, eBay, Etsy and Walmart.
Michigan law defines marketplace facilitators as a “person that facilitates retail sales for third-party marketplace sellers by listing or advertising the seller’s product for sale on its marketplace, and either directly or indirectly (through agreements with third parties or the facilitator’s affiliates), collects payment from retail purchasers and transmits that payment to marketplace sellers for consideration.”
North Carolina now mandates that marketplace facilitators are liable for the tax on third-party sales, starting Feb. 1. The nexus threshold is more than $100,000 in gross sales in North Carolina or at least 200 separate transactions in North Carolina. Marketplace facilitators meeting the above threshold are required to collect and remit tax on behalf of all marketplace sellers, regardless of whether the seller has a physical presence in North Carolina.
Wisconsin’s Act 10 makes marketplace providers liable for sales tax and mandates that marketplace providers must inform third-party sellers that the marketplace is collecting and remitting sales tax on their behalf, effective Jan. 1.
Sales and use tax collection is constantly changing, we can help ensure you stay compliant. Especially in today’s uncertain enironment, sales tax updates and extensions are happening daily. Keep up with the latest updates by reaching out. When you work with TaxConnex™, it’s all on us.
I help companies manage their sales tax risk by implementing sales tax outsourcing solutions and advising them on sales tax issues related to nexus, taxability, audits, and Voluntary Disclosure Agreements. I’ve worked in the sales tax field since 2000 and prior to that worked predominantly in software sales.