2020 Sales Tax Developments

Three months in and it’s already been a hectic year on many frontssales 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 thirdparty 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. 

 

Wisconsins 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. 


 

Louisiana vs Wal-Mart.com

Louisiana Supreme Court Finds Wal-Mart.com Does Not Have to Collect Sales Tax on Behalf of Third-Party Sellers

The U.S. Supreme Court’s 2018 decision in South Dakota v. Wayfair opened the door for states to require out-of-state sellers to collect sales tax even if they lacked a “physical presence” within that state. A majority of states have subsequently imposed such requirements. For example, as of July 1, 2020, businesses that sell their products online to customers in Louisiana must start collecting state and parish (county) sales taxes.

 

There is also the separate but related issue of “marketplace facilitators.” These are businesses that allow or facilitate third-party sales. Amazon and Wal-Mart, for example, allow third-party merchants to conduct sales through their websites. Most states included language in their post-Wayfair legislation that require these marketplace facilitators to collect and remit sales tax on behalf of third-party sellers. Louisiana’s law, however, did not include such language.

Despite this, Louisiana’s Jefferson Parish attempted to force Wal-Mart.com to remit taxes on third-party sales made through the site between 2009 and 2015. The parish’s sheriff, who also serves as its tax collector, argued that under pre-Wayfair law, Wal-Mart.com was properly classified as a “dealer” required to collect tax. On this basis, the sheriff sought a court order directing Wal-Mart.com to pay nearly $1.9 million in back sales taxes.

 

 

Although two lower courts ruled in favor of Jefferson Parish, a divided Louisiana Supreme Court agreed with Wal-Mart.com that it was not a dealer for purposes of sales tax collection. Justice John L. Weimer, writing for a 4-3 majority, said the legislature broadly defined “dealer” in the pre-Internet age to include out-of-state businesses that primarily sold goods through a mail-order catalogue. The key, however, was that these dealers actually owned the goods they were selling. In contrast, Weimer said there was no evidence the legislature ever intended dealer to cover “intermediaries that are only tangentially involved in sales transaction, such as a marketplace facilitator relative to sales by third party retailers.”

Court Points to Special Exception for Auctioneers as Proof Marketplace Facilitators Are Not “Dealers”

 

Weimer compared marketplace facilitators like Wal-Mart.com to auctioneers. It was generally accepted in Louisiana that auctioneers did not have to collect sales tax on goods sold at auction. The legislature therefore adopted special legislation requiring auctioneers to register as “dealers” and start collecting sales tax. The need for such legislation at all meant that third-party facilitators are presumably not “dealers,” Weimer noted. Indeed, to assume that facilitators were dealers, as Jefferson Parish urged, would mean that “any intermediary that aids or enables sellers to reach new customers although not selling anything” directly could be held responsible for collecting sales tax. Weimer said that would be an “absurd result.”

 

In a dissenting opinion, Chief Justice Bernette Joshua Johnson said she would hold that Wal-Mart.com “is responsible for collecting and remitting the taxes from sales of third party retailer items on its online Marketplace.” As the chief justice saw the case, Wal-Mart.com was not a “hands-off bystander” to these transactions. To the contrary, she noted that Wal-Mart.com “has sole control over the website as well as sole control of marketing of products.” More importantly, it owned the actual transaction information–the customer’s credit card information. Johnson said she was also troubled that the terms of Wal-Mart.com’s marketplace retailer agreements “effectively disallows collection of sales taxes by remote sellers.”

Louisiana Legislators May Moot Long-Term Impact of Court’s Ruling

 

In the end, the Supreme Court’s decision may only give Wal-Mart.com and other marketplace facilitators a brief reprieve. Two bills are currently pending before the state legislature that would bring Louisiana in line with the majority of states that now require marketplace facilitators to collect and remit sales tax on behalf of third-party sellers. One of the bills, SB 138 expressly states a marketplace facilitator must collect tax even if it is not a dealer. However, the bill would only apply to marketplace facilitators that derive more than $100,000 in gross sales or complete at least 200 transactions in Louisiana annually.

 

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.


 

 

 

July 2019 Sales and Use Tax Changes

As usual, July 1st of each year brings many sales and/or use tax changes.  Here is our list:

 

ALABAMA

The Dallas County Commission has imposed an additional one-half percent sales tax for public
school purposes.

The City of Phenix City has increased their sales tax rate by .50% which will increase the total rate depending on if the sale is in Russell County (9.5%) or Lee County (12.0%).

 

ARIZONA

Flagstaff, in Coconino county has increased to 9.180%.  Benson Use tax is now 3.5%

 

ARKANSAS

The City of Hampton has a sales tax rate of .50% starting July 1, 2019.  There were also 6 annexation actions that affected rates for Centerton, Pea Ridge, Highfill, Lake City, Flippin, and East Camden.

 

CALIFORNIA

Rate increases include San Mateo County, the cities of Glendora, Belmont, Burlingham, East Palo Alto, Redwood City, San Mateo, and South San Francisco.

 

COLORADO

The city of Durango rate is increasing to 3.5%.  The Pueblo Use tax rate was corrected to 3.70%.  The Ute Pass Region Ambulance District special tax hike of 1/2 of a cent was added to: Westcreek, Platte Springs, Tarryall, Lake George, Divide, Florrissant, and Woodland.

 

GEORGIA

County-wide sales tax changes are occurring in Dougherty, Elbert, Limpkin, Morgan, Upson, Whitfield, and Worth counties.

 

IOWA

You will see a 1% increase in the following Iowa cities:  Alleman, Altoona, Des Moines, Pleasant Hill, West Des Moines, Windsor Heights.

 

ILLINOIS

County-wide changes are occurring in Bureau, Fayette, Franklin, Jasper, Menard, Sangamon, and Union counties.

Illinois cities that have new tax rates include, Princeton, Berwyn, Frankfort (in Cook and Will counties), Lemont (in Cook, Dupage and Will counties), Lincolnwood, Elburn, Lake Forest, Wood River, McHenry, Milan, and Dakota.

 

KANSAS

Changes are occurring in the cities of Benton, Waverly, Caney, Pretty Prairie, Grandview Plaza and the county of Reno.

 

LOUISIANA

You will see a rate change for Allen Parish.

 

MONTANA

Isanta county Montana has a new rate increase.

 

MISSOURI

There are several Use tax changes in the cities of Pleasant Valley, Malden, Albany, Urich, Windsor, Maryville, Northmoor, Velda Village Hills, Pine Lawn, and Hollister.

City tax changes include Georgetown, Green Ridge, Hughesville, La Monte, Sedalia, and Smithton.

 

NORTH DAKOTA

Changes are occurring in New Rockford and Larimore.

 

NEBRASKA

Changes are occurring in Saint Edward, Newahwka, Coleridge, and Wauntetta.

 

NEW MEXICO

One change for Maxell in Colfax county.

 

OHIO

A county-wide rate increase is occurring in Crawford.

 

OKLAHOMA

Cherokee Sales & Use tax increased the total to 9.%%.  County wide changes are occurring in Rogers and Texas counties.

 

TEXAS

City rate changes include Charlotte, Primera, Cresson, and Mount Enterprise.

 

UTAH

County-wide rate changes are occurring in Davis and Summit counties.  The city of Bluff rate is increasing.

 

VERMONT

You will see changes in the city rates of Winooski and Brattleboro.

 

WASHINGTON

The sales tax rate for the city of Aberdeen is changing.

 

WEST VIRGINIA

The city of Kingwood, WV will see a 7.0% total rate.


sales tax by zip code app banner from zip2tax

The Full Breakout sales tax and use tax tables provide all tax rates broken down for every jurisdictional level including ZIP code, state, country, city, and special districts; and includes jurisdictional codes where applicable.

The sales tax and use tax tables provide the Primary Rate, which is the location within a ZIP code containing the USPS Office, and indicates whether shipping is taxable.

 

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