2019 has been a tidal wave of activity for eCommerce businesses trying to understand the complexities around sales tax as the “Wayfair effect” continues to impact remote sellers.
To back up, Wayfair is in reference to the landmark South Dakota vs. Wayfair Supreme Court case. This decision granted states the ability to set and enforce laws at the state level that require remote sellers to collect sales tax based on their economic activity into the state. Some states require a combination of transactions and sales, while others have only a sales threshold. When you cross the state’s threshold, you now have what’s called economic nexus. To complicate things, some states follow the precedent set by South Dakota, while others have completely unique rules that cause confusion.
As a result, remote sellers now have to keep up with ever-changing laws that might require you to collect sales tax in one state but not another. And since the Supreme Court decision, marketplace facilitator laws are a new wave of legislation that can both simplify and complicate matters for online retailers.
Thankfully, we’re highlighting some of these changes below to help you stay in the know. At TaxJar, we understand the frustration of thinking you finally understand where you have a sales tax obligation, only to have it change. Or worse, you don’t learn about new laws until it’s too late and you’re on the hook for past due taxes.
What’s Happening in October?
October might be one of the busiest months yet, with four states passing either new or amended economic nexus laws and 11 passing new marketplace facilitator legislation. These changes can have a big impact for remote sellers, as Kansas for example, has no economic threshold. Let’s take a look at the latest states to pass sales tax legislation that becomes active October 1, 2019, to help you determine if you’ll have a new obligation to collect and remit sales tax.
The following states have enacted or updated economic nexus laws that take effect October 1, 2019:
- Massachusetts (addition to cookie nexus)
- Tennessee (finally passed legislation from two years prior)
Arizona is unique in that it brings a tiered approach to those who qualify for economic nexus over the next three years. While most states have a set threshold that is permanent (until further notice), Arizona’s decreases over time from $200,000 (in 2019), to $150,000 in 2020, and $100,000 in 2021. So, if your sales are barely over $100,000 today, and hold steady, you wouldn’t cross the economic nexus threshold until 2021.
Kansas is one state to pay special attention to, as it appears to be exercising its right to set forth legislation at the state level that is unique to most others. There is no small seller exception, so all sales into the state will grant economic nexus to remote sellers. This means, if you have any activity in Kansas, you are required to register for a sales tax permit and collect sales tax from your customers.
Although Massachusetts previously recognized cookie nexus thresholds, they quietly passed new legislation for remote sellers who sell tangible personal property and services as well, lowering the threshold significantly from $500,000 and 100 transactions (cookie nexus) to $100,000 in the current or prior year.
Tennessee was an early adopter of economic nexus thresholds that require remote sellers to register and collect sales tax; however, the state’s law has been pending since March 2017. It’s finally a reality, so remote sellers who generate sales above $500,000 in Tennessee in the previous 12 months will now have an obligation to collect and remit sales tax.
Additionally, the states below passed new marketplace facilitator legislation requiring marketplaces like Amazon and Walmart to collect on behalf of the seller beginning October 1, 2019. The platforms that are currently collecting in each state are also listed:
- Arizona: (eBay, Etsy and Walmart)
- California: (Amazon, eBay, Etsy and Walmart)
- Colorado: (eBay, Etsy and Walmart)
- Maine (eBay, Etsy and Walmart)
- Maryland (eBay, Etsy and Walmart)
- Massachusetts (eBay, Etsy and Walmart)
- Nevada (eBay, Etsy and Walmart)
- North Dakota (eBay and Etsy)
- Texas (eBay, Etsy and Walmart)
- Utah (eBay, Etsy and Walmart)
- Wisconsin (Etsy is collecting 10/1/19, but the law doesn’t take effect until 1/1/2020)
As we’ve seen with economic nexus laws, marketplace facilitator laws are similar in that each state can enact its own guidelines. While one state might make you register if you only sell on a marketplace that collects on your behalf, others won’t. For our complete listing of all states with marketplace facilitator laws and the platforms that collect in each, visit our State by State: Marketplace Facilitator Laws Explained guide.
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