The Tax Cuts and Jobs Act (“TCJA”), passed in December 2017, made several significant changes to the internal revenue code (“IRC”) and Creating confusion and conformity issues.
TCJA Update - California Responds
The decision in South Dakota v. Wayfair, Inc. ("Wayfair"), has encouraged California to expand its doing business determination for sales and use tax collection and filing obligations. Beginning April 1, 2019, where a retailer located outside of California meets certain thresholds, they are required to collect and remit sales and use tax.
Wayfair continues its impact on the state and local tax landscape with California's new sales and use tax collection requirements which applies to any remote sellers that sell tangible goods for delivery into California such as on-line retailers, mail-order catalogs, telephone, or by any other means. However, California's expanded doing business determination for remote sellers is not retroactive, it applies only to sales on and after April 1, 2019. For retailers already registered to collect California use tax, there is no change in their registration and collection obligations as a result of the recent Wayfair decision.
WAYFAIR Update - New York Responds
The New York Department of Taxation and Finance ("Department of Taxation and Finance") has issued an Important Notice ("N-Notice") in response to the U.S. Supreme Court's June 2018 decision in South Dakota v. Wayfair ("Wayfair"), which abandoned the physical presence requirement for imposing sales tax collection responsibilities on remote sellers. The Department of Taxation and Finance has stated that as a result of the decision in Wayfair, “certain existing provisions in the New York State Tax Law that define a sales tax vendor immediately became effective.”
Remote sellers should take immediate note and monitor their sales into New York and where they have met both of the threshold requirements, they are required to register as a sales tax vendor with the Department of Taxation and Finance that will permit in order to collect and remit the applicable sales tax and/ or accept sales tax exemption certificates. New York remote seller thresholds are more advantageous to remote sellers verse other state's requirements.
WAYFAIR Update - Illinois Responds
In light of the Wayfair decision, states are continuing to refine their specific nexus standards. The latest to pass sales tax legislation related to remote sellers is Illinois. Consistent with Wayfair, effective beginning October 1, 2018, Illinois enacted selling thresholds requiring retailers with no physical presence in Illinois to register, collect and remit sales and use tax if the cumulative gross receipts from sales of tangible personal property to purchasers in Illinois are $100,000 or more, or the retailer enters into 200 or more separate transactions for the sale of tangible personal property to purchasers in Illinois. Prior to the October 1, 2018, remote retailers had to have a physical presence in Illinois before they were required to collect Use Tax.
Remote sellers should note if they have $100,000 or more of sales, or 200 or more separate transactions, to Illinois residents, they are required to collect and remit sales tax to Illinois effective October 1, 2018. There are further states which have not yet responded to Wayfair.
WAYFAIR Update - Michigan Responds
Michigan Department of Treasury recently announced that in an effort to align with the ruling in the Wayfair decision (South Dakota v. Wayfair, Mich. Dept. Treas., 08/01/2018), effective October 1, 2018, Michigan will require remote sellers, with sales exceeding $100,000 or having more than 200 transactions to Michigan purchasers in the previous calendar year, to collect and remit sales tax. The Department has also issued guidance addressing "economic presence" sales and use tax nexus standards for remote sellers.
By all accounts, more states will continue to adopt bright line nexus standards related to sales tax, creating additional complexity in managing nexus and state sales tax compliance. As an example, Michigan is joined only by Alabama, Hawaii, Indiana, Maryland, North Dakota, Rhode Island, Texas, and Wisconsin to have published guidance on sales tax nexus standards post Wayfair.
WAYFAIR Update - States Respond (PART TWO)
Imposing sales tax on remote sellers continues to come into focus as more states respond to the U.S. Supreme Court's decision, in South Dakota v. Wayfair, 17-494 (06/21/2018) establishing that a remote seller can create substantial nexus with a taxing state through economic and virtual contacts. Currently, more than half the states with a sales and use tax have implemented economic nexus standards. Remaining states such as New Jersey, South Carolina, Arkansas, Nevada, Texas, Florida and Tennessee have either proposed regulations or have indicated nexus policies are forthcoming.
While more states are moving toward and economic nexus standards, there is still a fair amount of uncertainty with respect to how remaining states will react to the decision. Contact SimekScott to discuss.
WAYFAIR Update - States respond
As anticipated, states have begun to respond to the U.S. Supreme Court's decision in South Dakota v. Wayfair nullifying a 1992 Supreme Court precedent set by Quill Corp. v. North Dakota requiring physical presence before a state can compel the collection and remittance of sales and use tax.
As more states begin to assert economic nexus standards, companies are likely to face challenges in determining nexus exposure based on states various nexus factors. Monitoring the states response to Wayfair will be key to managing overall tax exposure. In this Insight we discuss: New Jersey; North Dakota; Mississippi; Vermont; Minnesota; Louisiana; Maryland; Idaho; Texas; Wisconsin; Indiana; Alabama; Hawaii; Iowa; Massachusetts and Rhode Island.
South Dakota V. Wayfair - US Supreme Court Decision
On June 21, 2018, the U.S. Supreme Court issued a decision in South Dakota v. Wayfair, overturning the physical presence standard espoused in Quill v. North Dakota and National Bellas Hess v. Department of Revenue of Ill.
The Wayfair decision marks a stark change from traditional “physical” presence standard. Physical presence is no longer the standard and the obvious inference is that more states will now adopt sales tax nexus thresholds subjecting more remote sellers to collect and remit sales tax.