Leveling the Playing Field for Illinois Retail Act

Illinois Will Require Online Marketplaces to Collect Sales Taxes for Out-of-State Sellers Starting in 2020

Illinois was quick to jump on the post-Wayfair bandwagon in requiring out-of-state businesses to start collecting sales taxes on purchases made by in-state customers. Now the state has gone a step further. On June 28, 2019, Illinois Gov. J. B. Pritzker signed into law Senate Bill 690, which impose new collection requirements on online marketplaces starting on July 1, 2020. SB 690 also directs Illinois officials to implement new automated systems to assist businesses in complying with the law.

Thresholds Set for Remote Retailers

SB 690, officially named the “Leveling the Playing Field for Illinois Retail Act” by the state legislature, says that a “remote retailer” must collect sales tax if its “gross receipts from the sales of tangible personal property to purchasers in Illinois are $100,000 or more,” or the retailer makes more than 200 separate sales transactions to Illinois buyers during the tax year. In this context, a remote retailer includes a business that facilitates transactions between a buyer and a third-party seller.

 

For example, if a small business in Oregon sells goods to Illinois customers through Etsy, then Etsy is considered the remote retailer and must take responsibility for collecting and remitting any applicable sales tax. As far as Illinois law is concerned, Etsy is the actual retailer as opposed to the third-party seller.

And while Etsy is obviously one of the larger online marketplaces, any platform whose total sales exceed the $100,000-or-200-transactions threshold meets the definition of remote retailer. This includes first-party sales made by the platform itself in addition to all third-party transactions.

 

The platform is also responsible for determining whether it meets the threshold. This determination must be made on the last day of the month for March, June, September, and December. If at each of these times the remote retailer made enough sales to meet or exceed the threshold during the preceding 12-month period, it must subsequently collect and remit sales taxes to Illinois for the following 12-month period.

The marketplace must also certify to its individual third-party sellers that it has assumed all responsibility for complying with Illinois sales tax rules.

For their part, third-party sellers must keep records of any sales they make to Illinois customers through an online marketplace starting no later than July 2020.  But to reiterate, the third-party seller is not liable for collecting taxes on marketplace sales, and such sales will not count towards the third-party seller’s individual threshold under SB 690. So if our hypothetical Oregon retailer makes all of her Illinois sales through Etsy, as opposed to filling orders directly, she is not responsible for collecting or remitting any tax on her own.

 

New Regulations for Service Providers, Automated Systems, Coming by the End of the Year

SB 690 directs the Illinois Department of Revenue to “establish standards for the certification of certified service providers and certified automated systems” to assist out-of-state businesses in complying with their sales tax collection obligations.

 

A certified service provider (CSP) is a business authorized by the Department to “perform the remote retailer’s use and occupation tax functions,” while a certified automated system (CAS) is any software used by the State to perform sales tax calculations. The Department must adopt CSP and CAS regulations no later than December 31, 2019, and have the systems up-and-running by July 1, 2020.

 

Remote Sellers – Did you enjoy your summer?

While you may have been enjoying the dog days of summer, you may not have noticed that some states implemented new Remote Seller rules.

 

Effective July 1st, rules were established for:

Arkansas

New Mexico

Pennsylvania

Rhode Island

Virginia

Connecticut revised their thresholds effective July 1st.

 

Effective August 1st, Ohio starts with their rules.

 

Also, coming this Fall, effective October 1st, watch for these new states to come onboard.

Arizona

Kansas

Texas

 

For a review of all the states with Remote Seller Rules, follow our handy chart below.  This is not legal advice, but guidance for your review.  The chart includes links to the individual states’ Web site pages and FAQ pages, where available.

 

 STATE$ Gross Receipts
Limit
# Retail Sales
Transactions
EFFECTIVE DATEDOR LinksFAQs
Alabama>$250,000October 1, 2018AL InfoFAQs for AL
Arkansas>$100,000200July 1, 2019AR InfoFAQs for AR
Arizona>$200,000 in 2019
>$150,000 in 2020
>$100,000 in 2021 +
October 1, 2019AZ Info
California>$500,000April 1, 2019CA InfoFAQ for CA
Colorado>$100,000December 1, 2018CO Info
Connecticut$100,000"and" 200December 1, 2018
Revised July 1, 2019
CT Info
Delaware
District of Columia>$100,000"or" >200January 1, 2019DC Info
Florida
Georgia>$250,000 in 2019
>$100,000 in 2020
"or" >200January 1, 2019GA InfoFAQs for GA
Hawaii$100,000 +"or" 200July 1, 2018HI Info
Illinois$100,000 +"or" 200October 1, 2018IL InfoFAQ for IL
Indiana>$100,000"or" 200October 1, 2018IN InfoFAQ for IN
Iowa$100,000January 1, 2019IA Info
Kansas0October 1, 2019KS Info
Kentucky$100,000 +"or" 200October 1, 2018FAQs for KY
Louisiana>$100,000"or" 200January 1, 2019LA Info
Maine>$100,000"or" 200July 1, 2018ME Info
Maryland>$100,000"or" 200October 1, 2018MD Info
Massachusetts>$500,000"and" 100October 1, 2017MA InfoFAQs for MA
Michigan>$100,000"or" 200October 1, 2018MI InfoFAQs for MI
Minnesota>$100,000
in 10+ transactions
"or" 100October 1, 2018MN InfoFAQs for MN
Mississippi>$250,000September 1, 2018MS Info
Nebraska>$100,000"or" 200January 1, 2019FAQs for NE
New Jersey>$100,000"and" >200October 1, 2018NJ Info
New Mexico> $100,000July 1, 2019
New York>$300,000"and" >100January 1, 2019NY InfoFAQs for NY
North Carolina>$100,000"or" 200November 1, 2018NC InfoFAQs for NC
North Dakota$100,000"or" 200October 1, 2018ND InfoFAQs for ND
Ohio>$100,000"or" 200August 1, 2019OH InfoFAQs for OH
Oklahoma>$10,000
>$100,000 in 2019
July 1, 2018
November 1, 2019
OK Info
Pennsylvania>$100,000July 1, 2019PA Info
Rhode Island$100,000"or" 200July 1, 2019RI Info
South Carolina>$100,000November 1, 2018SC InfoFAQs for SC
South Dakota>$100,000"or" 200November 1, 2018 SD Info
Texas$500,000October 1, 2019TX Info
Utah>$100,000"or" >200January 1, 2019UT Info
Vermont$100,000"or" 200July 1, 2018VT InfoFAQs for VT
Virgina>$100,000"or" 200July 1, 2019VA Info
Washington>$100,000"and" 200October 1, 2018WA Info
West Virginia>$100,000"or" 200January 1, 2019WV Info
Wisconsin>$100,000"or" 200October 1, 2018WI Info
Wyoming>$100,000"or" 200February 1, 2019WY Info

 

 


Need help with filing sales and use taxes in all your new state obligations?

We recommend contacting Brian Greet at TaxConnex.  Brian and his team have been assisting our clients with sales tax filing and consulting long before “remote sellers” became a common phrase in sales tax business.

Visit www.taxconnex.com or call 877-893-5304 for an initial, free consultation.