Sales Tax Updates by State
As the end of year approaches, it’s important to remember that tax updates often occur throughout the year. To ensure you are up-to-date on the latest sales tax rules, we have compiled some of the most important sales tax updates by state.
In March 2017, Alabama enacted use tax notice and reporting requirements legislation. The legislation authorizes the Alabama Department of Revenue to implement notice and reporting requirements for sellers that do not collect Alabama sales and use tax.
Effective July 1, 2017, the Alabama Department of Revenue has the power to require the reporting of retail sales and customer notification (within constitutional limitations) when the seller does not collect sales, use, or simplified sellers use tax on Alabama sales transactions and to provide for civil penalties.
Beginning July 1, 2017, remote sellers that have over $100,000 of sales to Colorado customers and do not collect sales tax, must notify their Colorado customers of the customers’ obligation to pay Colorado use tax. This notice must be provided to each customer at the time of purchase (typically on the invoice) and must contain specific language. There is a $5 penalty per transaction where notice was not given with a maximum annual penalty of $25,000.
Beginning January 31, 2018, remote sellers that do not collect sales tax must provide an annual summary of spending to Colorado customers who spend more than $500 with the retailer by January 31 each year. There is a penalty of $10 per failure to give this notice with a maximum annual penalty of $50,000.
Beginning March 1, 2018, if a seller has more than $100,000 of gross annual sales in Colorado, the remote retailer must provide the Colorado Department of Revenue with a report that includes the customer’s name, address, and total purchases by March 1 each year. If the non-collecting retailer fails to provide the proper notice, it will be penalized $10 times the number of Colorado purchasers that should have been included in the report with a maximum annual penalty of $50,000.
Based on these provisions, companies could pay up to $125,000 in penalties in a single year even though they have no physical presence in Colorado.
Colorado Department of Revenue began enforcement of the reporting and notification requirements on July 1, 2017. The Department has agreed to waive any penalties for failure to follow the law’s notice and reporting requirements for transactions occurring prior to that date.
For additional information visit:
District of Columbia
The District of Columbia Office of Tax and Revenue (OTR) has issued a reminder to taxpayers that, effective November 1, 2017, special event promoters hosting an event with at least 50 vendors must provide the OTR with a preliminary list of all participating vendors and exhibitors, their addresses, tax identification numbers, representatives, and telephone numbers at least 30 calendar days before the special event occurs.
A final list of participants must also be submitted no later than 10 calendar days after the last day of the special event. All required documentation must be submitted electronically via the OTR’s tax portal, MyTax.DC.gov. The OTR has issued a user’s guide to help special event promoters familiarize themselves with the registration process.
House Bill 1129 became public law on April 28, 2017. Effective July 1, 2017, a retail merchant that does not have a physical presence in Indiana is required to collect and remit sales tax if gross revenue from sales into Indiana in a calendar year exceeds $100,000, or if the retail merchant makes sales into Indiana in more than 200 separate transactions in a calendar year.
However, the American Catalog Mailers Association and NetChoice are challenging the legislation as being in violation of the Commerce Clause of the US Constitution, as interpreted by the Supreme Court in quill. The trade associations made attempts to convince Indiana to suspend enforcement of the provision pending the decision in the South Dakota case on economic nexus. However, the state has not responded.
Tax Free Shopping Program for international travelers extended
Effective June of 2017, the sunset date for the Tax Free Shopping Program is extended to July 1, 2023. The Program allows international travelers to obtain a refund of sales tax paid on taxable purchases of corporeal movable property that is permanently removed from the state. Previously, the Program was set to terminate on July 1, 2017.
Sales and use tax exemption for dental devices restored
Effective July 1, 2018, there is an exemption on sales and purchases of orthotic devices, prosthetic devices, prostheses, restorative materials, and other dental devices from Louisiana sales and use tax. Prior to amendment, the exemption was partially suspended, subjecting these purchases to state sales and use tax at the rate of 3% until July 1, 2018.
Sales and use tax nexus — remote sellers
Effective November 1, 2017, a seller is deemed to have nexus in Maine if:
- its gross revenue from delivery of tangible personal property, products transferred electronically or services that are taxable by Maine into the state in the previous calendar year or current calendar year exceeds $100,000
- if there are at least 200 separate transactions in the previous calendar year or the current calendar year of sales of tangible personal property, products transferred electronically or services that are taxable by Maine for delivery into the state
Tax refunds to purchaser for retailers
A person requesting a refund or credit of erroneously or illegally collected sales tax must submit an affidavit in a form prescribed by the State Tax Assessor. It must state that the person has not and will not request a refund of the tax from the retailer. This is effective as of November 1, 2017 and is applicable to requests for credit or refund for which administrative or judicial review is still available.
Tax refunds to purchaser for service providers
The law provides that a service provider tax that has been erroneously or illegally computed by a service provider and included on a customer’s bill must be refunded or credited to the customer by the service provider. A credit or refund may not be allowed for such a tax until the service provider has provided evidence to the State Tax Assessor proving that the tax has been refunded or credited to the customer. This is effective November 1, 2017 and is applicable to requests for credit or refund for which administrative or judicial review is still available.
Massachusetts requires out-of-state sellers to collect tax on Internet sales to Massachusetts residents if:
- during October 1, 2016 to September 30, 2017, it had in excess of $500,000 in Massachusetts sales from transactions completed over the Internet and made sales resulting in a delivery into Massachusetts in 100 or more transactions
- beginning with 2018, if during the preceding calendar year it had an excess of $500,000 in Massachusetts sales from transactions completed over the Internet and made sales resulting in a delivery into Massachusetts in 100 or more transactions
Minnesota could pass “marketplace sales tax” law in 2019
The Marketplace Provider law extends the responsibility to collect and remit sales tax to internet marketplace providers located in Minnesota, unless the sellers on the marketplace site are already collecting the tax. This law is effective July 1, 2019, or earlier if the U.S. Supreme Court or Congress allows for collection of sales tax on remote sellers.
Marketplace Fairness Act (MFA)
If this act passes, online sellers who make more than $1 million in remote (non-home state) sales per year would be required to collect sales tax not only in the states where they already have sales tax nexus, but also in states where they don’t have a nexus. The $1 million is remote “sales,” and not profit. This bill was introduced in April of 2017 and a hearing was held in May of 2017. Additional information can be found at: https://www.congress.gov/bill/115th-congress/senate-bill/976
Remote Transactions Parity Act of 2017
Similar to the Marketplace Fairness Act, the Remote Transaction Parity Act (RTPA) would not affect existing nexus, but would require retailers to collect sales tax in remote states in addition to states where they have nexus.
The RTPA works on a tiered system, with online sellers making $10 million in sales or more being subjected to the law in the first year, online sellers making $5 million in sales or more subjected to the law in the second year, and online sellers making more than $1 million in sales subjected to the law in the third year. In year 4, there is no threshold. The exception is online sellers who utilize an electronic marketplace for the purpose of making products or services available for sale to the public. This bill was introduced in April of 2017 and a hearing was held in May of 2017. For more information, visit: https://www.congress.gov/bill/115th-congress/house-bill/2193
Effective January 1, 2018, a seller is deemed to have substantial nexus in Ohio if the seller:
- uses in-state software to sell or lease taxable tangible personal property or services to consumers, provided the seller has gross receipts in excess of $500,000 in the current or preceding calendar year from the sale of tangible personal property for storage, use, or consumption in Ohio or from providing services the benefit of which is realized in Ohio, or
- provides or enters into an agreement with another person to provide a content distribution network in Ohio to accelerate or enhance the delivery of the seller’s website to consumers, provided the seller has gross receipts in excess of $500,000 in the current or preceding calendar year from the sale of tangible personal property for storage, use, or consumption in Ohio or from providing services the benefit of which is realized in Ohio.
Effective February 1, 2018 (except with regard to electronically or digitally delivered, streamed or accessed material), remote sellers, marketplace facilitators or referrers with aggregate sales of $10,000 or more in the prior calendar year must file an election to either collect and remit sales tax or comply with notice and reporting requirements. This must be done before March 1, 2018 and on or before June 1 beginning June 1, 2019 and each year thereafter.
Retail Sale Facilitators who have:
- use in-state software to make sales at retail; or
- do both of the following:
- contract or agree with a retailer to list and/or advertise in Rhode Island taxable goods/services
- directly or indirectly collect payments from in-state customers and transmit payments to a retailer
- $100,000 in gross revenue from the sale of taxable goods/services delivered in Rhode Island
- 200 or more transactions of taxable goods/services delivered in Rhode Island
Must do the following beginning January 15, 2018:
- annually provide a list of names/addresses of retailers for whom they collected Rhode Island sales tax
- Annually provide a list of names/addresses of retailers for whom they did not collect Rhode Island sales tax but who still used their services
More information can be found at: https://news.cchgroup.com/2017/08/08/rhode-island-lists-responsibilities-retail-sale-facilitators/
South Dakota Court ruled that state’s economic nexus legislation is unconstitutional
On March 22, 2016, Governor Dennis Daugaard signed Senate Bill 106 into law, which went into effect May 1, 2016. The bill requires remote sellers with no physical location in South Dakota to remit sales tax and follow all procedures of the law, as if they have a presence in the state, if they meet one of two criteria in the previous calendar year or the current calendar year:
- the remote seller’s gross revenue of sale of tangible property, any products transferred electronically, or services delivered into South Dakota exceeds $100,000
- the remote seller has 200 or more separate transactions tangible property, any products transferred electronically, or services delivered into South Dakota
In the ruling, the state acknowledged that under Quill Corp. v. North Dakota, the State of South Dakota is prohibited from imposing the sales tax collection and remittance obligations. The state agreed that the statute was unconstitutional and agreed with the summary judgement finding. This was expected as the case progresses towards an appeal to the U.S. Supreme Court in an effort to overturn Quill. On October 2, 2017, South Dakota filed a petition for certiorari with the U.S. Supreme Court to take up South Dakota v. Wayfair, Inc. in an effort to overturn Quill Corp. v. North Dakota. For additional information, visit: https://dor.sd.gov/Taxes/Business_Taxes/SB106.aspx
Notice #17-12 outlines the delayed enforcement of Rule 129(2), which will not be enforced until its legality is determined. It provides that effective January 1, 2017, sales in Tennessee greater than $500,000 for the previous 12 calendar months creates substantial nexus and requires collection of sales tax for sales made on or after July 1, 2017.
If an out-of-state dealer has no physical presence in Tennessee and does not meet the $500,000 threshold, it is not required to register. However, the Department encourages all dealers to register as a convenience to their customers.
Effective July 1, 2017, owning tangible personal property for sale located in Virginia is sufficient to create nexus for remote sellers. For more information, visit: https://lis.virginia.gov/cgi-bin/legp604.exe?171+ful+CHAP0051
Virginia has amended its tax code regarding the nexus requirements for out-of-state businesses to collect and remit sales tax in the state. Effective July 1, 2017, the definition of “dealer” has been modified to include owning tangible personal property for sale that is located in the Commonwealth of Virginia. This activity will create sufficient nexus to require out-of-state businesses to collect and remit Virginia sales tax on sales to customers in Virginia.
Washington has enacted legislation that creates marketplace nexus and reporting requirements provisions and expands the state’s economic nexus provision. Effective January 1, 2018, remote sellers, referrers and marketplace facilitators must elect to either collect or remit Washington sales or use tax on taxable sales into Washington or comply with notice and reporting requirements. The requirements apply to remote sellers or marketplace facilitators with gross receipts from retail sales sourced to Washington in the current or preceding calendar year of at least $10,000. House bill 2163 passed Chamber and became law effective January 2018. More information regarding the bill can be found at: https://app.leg.wa.gov/billsummary?BillNumber=2163&Year=2017
Twenty Washington municipalities (Richard, Wenatchee, La Center, Vancouver, Warden, Elma, Issaquah, Maple Valley, Redmond, Renton, Bremerton, Shelton, Bonney Lake, Stanwood, Sultan, Lacy, College Place, Walla Walla, Pullman, and Grandview) will be annexing unincorporated territory, effective January 1, 2018. These annexations may result in changes to local sales and use taxes.
Effective July 1, 2017, out-of-state sellers with no physical presence in Wyoming will be required to remit Wyoming sales tax if, in the current or immediately preceding calendar year, they have gross revenue from Wyoming sales of tangible personal property, admissions or services in excess of $100,000, or have sold tangible personal property, admissions or services delivered into Wyoming in 200 or more separate transactions.
If you have questions about these updates, or want to learn more about what they mean for you, contact our tax experts at 925.271.8700 or at email@example.com.