New York joins states receiving sales tax windfall from e-commerce
WASHINGTON — New York Gov. Andrew Cuomo's proposed 2020 budget estimates the state will receive an additional $250 million in sales tax revenue in the fiscal year beginning April 1 as it joins other states in reaping the benefits of last year’s Supreme Court decision on remote sales.
New York’s windfall revenue is expected as the state joins Texas in setting the threshold higher than the $100,000 trigger in sales that most other states are using to require collection by out-of-state e-commerce vendors. The State Department of Taxation and Finance announced Tuesday that it would require out-of-state retailers with annual sales of more than $300,000 or 100 transactions in New York to collect and remit sales tax.
New York’s statewide sales tax is 4%, but over 95% of the state’s residents live in areas where additional city or county sales taxes bring the total rate to 8% or higher. One percentage point of the statewide sales tax is dedicated to New York’s Sales Tax Revenue Bond Fund.
Tuesday’s announcement by New York did not mention whether the new e-commerce remote sales tax collection requirement will apply to the collection of local city or county sales taxes.
“Additional information concerning this requirement will be forthcoming from the Department of Taxation and Finance,” the announcement said.
Last June the Supreme Court upheld South Dakota’s 2017 law requiring sales tax collection if a retailer has at least 200 transactions or $100,000 in sales in the state over a calendar year, overturning the previous standard that required a retailer to have a physical presence on the state.
The justices who ruled in favor of South Dakota’s state law said it met several requirements for not placing an undue burden on interstate commerce, including the state’s adoption of streamlined sale tax rules and the existence of only one statewide sale tax.
"New York’s tax laws regarding remote sales into the state have been on the books since 1989," Department of Taxation and Finance spokesman James Gazzele said in an email Thursday. "The department has issued a notice reminding sellers that this law became effective when the Wayfair decision was issued. That notice also provides information to out-of-state sellers regarding vendor registration and reporting requirements."
Cuomo's budget also calls for the New York Legislature to enact legislation providing for the collection of sales tax by marketplace providers such as Amazon and eBay to "simplify sales tax enforcement and ease collection burdens for the retailers who sell through these platforms." State lawmakers also may address how to collect local sales taxes.
New York will join most states in triggering the collection of sales tax at 100 e-commerce transactions.
Texas has a draft regulation calling for e-commerce retailers with $500,000 or more sales in the state to begin collection on Oct. 1, 2019, that may see changes by the Texas Legislature.
The California Department of Tax and Fee Administration announced in December that beginning April 1 out-of-state e-commerce retailers will be required to collect California use taxes if during 2018 or this year their in-state sales exceed $100,000 or 200 transactions.
“Retailers who are already required to be registered to collect California use tax prior to April 1, 2019 will see no change in their registration obligations,” the announcement said. “Retailers with a physical presence in California are still generally required to be registered with the CDTFA.' "
"We know the legislature is also looking closely at this issue and we look forward to working with them as we proceed," CDTFA Director Nick Maduros said in the December announcement.
California, meanwhile, will require remote e-commerce retailer to collect and remit local sales taxes only if the vendor exceeds $100,000 in sales or 200 transaction in that particular jurisdiction.
“District taxes are the voter-approved sales and use taxes imposed by cities, counties and other local jurisdictions (districts) added to California's base sales and use tax rate of 7.25% to fund important local services,” the December announcement said.
E-commerce is only about 10% of all sales, although the Census Bureau reported it grew 14.5% in the third quarter of 2018 compared to the year prior.
Iowa, Louisiana, Nebraska and West Virginia began requiring collection on Jan. 1.
According to the conservative-leaning Tax Foundation, 34 of the 45 states with statewide sales taxes adopted laws or regulations to tax remote sales as of last month.
Twelve of those 34 states “are clearly compliant with the Wayfair Checklist,” which the Tax Foundation described as measures suggested by the Supreme Court in its ruling as safe harbors to protect a state from legal challenges.
“Some states — Louisiana is a particularly egregious example — are proceeding despite tax codes which impose significant burdens on remote sellers and raise serious legal issues,” the Tax Foundation said. “Colorado, another state with serious compliance issues, recently postponed remote sales tax collections.”