Sales tax has been a hot topic in the news lately. Increasingly, states that are desperate for to makeup for budget shortfalls are attempting to close the gap with sales tax.
We recently covered a landmark court ruling that will change the sales tax game in Colorado and could possibly even challenge the “sales tax nexus” precedent set by the Quill v. North Dakota case. But Colorado isn’t the only state attempting to do an end run around the nexus precedent. This could mean big changes in the future when it comes to the way some online sellers collect and remit sales tax.
Here’s what you, as an online seller, need to know about recent sales tax legislation:
The South Dakota House and Senate have both passed a law that would require remote sellers to collect sales tax from buyers in the state if they meet one of two requirements:
1.) The seller sells more than $100,000 in goods to South Dakota buyers
2.) The seller sells tangible personal property, an electronic product, or a service to buyers in 200 or more separate transactions to buyers in South Dakota
Of course, this bill directly contradicts the established nexus precedent, where sellers are required to have some kind of “significant connection” to a state before they are required to collect sales tax from buyers in the state. The South Dakota law is just one in a spate of laws designed to attract a lawsuit that might eventually overturn the current nexus precedent. The bill currently awaits the South Dakota governor’s signature.
Utah’s Senate has passed an affiliate nexus bill aimed at encouraging Amazon to collect sales tax from buyers in the state. This bill would not only clarify that 3rd party affiliates cause nexus for big online companies like Amazon, it also specifies that when a person inuses trademarks, service marks, trade names in that are the same or substantially similar to those used by the out-of-state seller that creates nexus for that out-of-state seller. It’s very clear that this bill is aimed at having Amazon collect sales tax from buyers.
Current affiliates in the state worry that the law will backfire and that Amazon will shut down their affiliates in the state rather than comply and begin collecting sales tax. On the other hand, Amazon recently began collecting sales tax in Colorado – one of the states where they had previously shut down the affiliate program rather than collect sales tax from Colorado buyers. That move could signal that Amazon is more inclined to cave in to various states’ pressure to collect sales tax.
It’s also worth noting that Rep. Jason Chaffetz, a representative from Utah, introduced the Remote Transaction Parity Act (RTPA) in the U.S. House. Clearly Utah lawmakers are extremely concerned with closing state budget gaps through more sales tax collection.
Update: This measure was defeated for this year due to the efforts of bloggers! You can read all about it here.
Similar to Utah’s proposed law, Louisiana is attempting to pass a bill that would require remote sellers (sellers without sales tax nexus in the state) who solicit sales through a 3rd party (such as an independent contractor or an affiliate) and sell more than $50,000 in the state in a year to collect sales tax from Louisiana buyers. This is similar to the click-through nexus laws that many states already have on the books, but notable because it comes at a time where many states are attempting to get around nexus.
Keep in mind that things can change fast when it comes to sales tax laws! All of the above was current as of the date of this post, but stay tuned to TaxJar’s Twitter or subscribe to our blog for more breaking sales tax news as it happens.