Eleven more states begin requiring online sales tax collection
WASHINGTON – Eleven states began requiring e-commerce retailers to collect sales taxes on Oct. 1, joining the first three that did soon after June 21 Supreme Court ruling in South Dakota v. Wayfair, Inc.
Another wave of states is expected to begin implementation Jan. 1, according to the National Conference of State Legislatures.
Still other states among the 45 that have statewide sales taxes are waiting for their state legislatures to convene in early 2019 before taking action.
“States are at different stages in the game for remote sales tax collection,’’ Jake Lestock, a policy specialist in the State-Federal Relations Division of NCSL said in an email on Tuesday.
“Many are fully prepared to enforce while some are still developing next steps,” Lestock wrote. “One thing is for certain though, states are taking a very careful approach to each situation. States understand efficient and friendly tax administration is important for successful and lasting implementation of their long overdue collection authority.”
Gregory Matson, executive director of the Multistate Tax Commission, echoed that message. “The more uniform the states can be, the better off it's going to be for everybody,” he said.
Matson's organization has a working group trying to define what constitutes a marketplace facilitator.
“eBbay is a very different model from Amazon,” Matson said. “The way they process the transaction is normally directly to the person who is selling on the eBbay site.”
Some states are phasing in their implementation. One of the 11 states that began requiring sales tax collection for remote sales on Monday is Alabama, which already was enforcing a reporting requirement dating back to July 1, 2017.
State and local governments could have gained an additional $8 billion to $13 billion in sales tax revenue in 2017 if they were given authority to require sales tax collection from all remote sellers, the U.S. Government Accountability Office said in a report released in December.
The Marketplace Fairness Coalition of major brick-and-mortar retailers, local chambers of commerce and commercial real estate firms estimated prior to the high court’s decision that lost sales tax revenue will grow to $33.9 billion this year.
The June 5-4 ruling overturned a longstanding requirement that a retailer must have a physical presence in a state before it can be required to collect sales taxes from an online retailer.
All nine of the justices found the physical presence standard was outdated, but four of the justices preferred that Congress address the issue.
The majority opinion written by now retired Justice Anthony Kennedy signaled that South Dakota statute may pass the test of not putting an undue burden on interstate commerce, but that determination will be decided by a state court.
South Dakota is a member of Streamlined Sales and Use Tax Agreement and provides a small business exemption for retailers with less than 200 transactions or $100,000 in sales in the state.
South Dakota won’t begin enforcing that law until Nov. 1.
Hawaii, Maine and Vermont were the first states to act with a July 1 implementation date, according to NCSL.
The second wave of implementation came on Monday from Alabama, Illinois, Indiana, Kentucky, Maryland, Michigan, Minnesota, Nevada, New Jersey, Washington and Wisconsin when they began requiring collection of sales taxes.
Fifteen states have passed laws setting the same sales thresholds as South Dakota.
Some have laws saying both a certain number of transactions and sales dollar amounts need to be achieved to trigger collections while others require only one of the two, attorneys participating in an American Bar Association webinar on the Wayfair decision on Tuesday were advised.
In addition, the webinar participants were told trigger dates vary with some states using the previous calendar year, others using the last 12 months, and others doing so prospectively.
The 45 states that levy sales taxes fall into three broad categories: those with South Dakota-style laws; those that enacted laws codifying the old physical presence standard and those that fall into a gray area because their current laws might require collection of sales taxes.