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.

 

phone apps

Georgia House Goes a Step Further to Collect Sales Taxes

Georgia House to Require “Marketplace Facilitators” like Uber, Airbnb, and Ebay to Collect Sales Taxes

In the wake of the U.S. Supreme Court’s June 2018 decision in South Dakota v. Wayfair, Inc., a number of states have quickly moved to require out-of-state Internet-based sellers to collect and remit sales taxes on in-state purchases. For example, a new law took effect in Georgia on January 1, 2019, mandating retailers collect that state’s 4 percent sales tax for all online sales.

Now, Georgia legislators may go a step further and compel “marketplace facilitators” like eBay, Uber, and Airbnb to collect state sales tax on transactions completed by their users.

House Bill 276

On March 4, the Georgia House of Representatives passed House Bill 276 by a vote of 158-6. HB 276 proposes to expand the definition of what businesses qualify as “dealers” required to collect and remit sales tax. Specifically, the bill states anyone who “[a]cts as a marketplace facilitator to facilitate retail sales” in excess of $100,000 per year is now a dealer.

A “marketplace facilitator,” in turn, is any business that provides services designed to “facilitate a retail sale that is taxable” under Georgia law.

This includes but is not limited to the following:

  • providing any physical or electronic infrastructure to to bring “purchasers and marketplace sellers together”;
  • transmitting or communicating any offers (or acceptance of offers) between purchasers and sellers;
  • processing and collecting payments from purchasers on behalf of sellers;
  • taking orders or reservations on behalf of sellers; or
  • providing advertising, marketing, or other promotional services.

To put this in practical terms, HB 276 would likely apply to the following situations:

  • A resident of Macon, Georgia, purchases a computer on eBay from an out-of-state seller. HB 276 requires eBay to collect and remit the Georgia sales tax on this purchase.
  • A group of friends in downtown Atlanta arrange for a ride via the Uber app. HB 276 requires Uber to collect and remit the sales tax on this sale.
  • Out-of-state tourists arrange to stay in a private home in Augusta by making a reservation using Airbnb. Now Airbnb must then make sure to collect and remit the sales tax.

In other words, this Bill shifts the burden of dealing with sales taxes away from the individual sellers; many of whom may be too small to register with Georgia authorities; and places it on the companies that “facilitate” transactions with the purchasers.

GA Stands to Receive Millions from Online Sites

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