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Tronconi Segarra & Associates

Williamsville, Buffalo & Western New York CPA

News

More States to Enforce Remote Seller Filing Requirements Starting This Fall

A number of states will begin enforcing their new sales tax filing requirements for remote sellers in the coming weeks. Since the U.S. Supreme Court’s decision in South Dakota v. Wayfair Inc. in June of last year, that eliminated Quill’s physical presence standard for sales tax nexus, just about every state has introduced economic nexus thresholds (i.e., sales over $100,000 or 200 transactions) requiring remote sellers to register, collect and remit sales tax if they exceed their threshold. A remote seller is generally any business that sells tangible personal property or services for delivery into a state, using the Internet, mail order, or telephone, without having physical presence in that state. Please note that this definition includes all businesses and is not limited to just those entities that sell or transact business over the internet.

Starting October 1, 2019, economic nexus thresholds will go into effect in the following states:

  • Arizona [sales over $200,000 for 2019; sales over $150,000 for 2020; sales over $100,000 for 2021 & subsequent years]
  • Kansas [no minimum threshold]
  • Massachusetts [sales over $100,000]
  • Tennessee [sales over $500,000]
  • Texas [sales over $500,000]

In addition, starting November 1, 2019, economic nexus thresholds will go into effect in:

  • Oklahoma [sales over $100,000]

If you are a remote seller with sales over the denoted threshold amounts in 2018 or 2019, then you should consider registering to collect and remit sales tax in the aforementioned states prior to the effective date. Currently, Kansas has no small-seller exception or minimum sales threshold and expects all remote sellers to collect and remit the applicable sales or use tax on sales delivered into the state. The Kansas legislature may need to pass new legislation before the Dept. of Revenue can authorize a small-seller exception for remote sellers.

There are other factors that remote sellers need to consider before registering, including their prior business activities in these states. If you have questions about remote seller filing requirements in these or other states, you can contact a member of our State and Local Tax team using the Contact Form below. Be sure to indicate “Wayfair” in Your Message and a member of our team will follow up to discuss your questions.

Illinois Amnesty Available

The Illinois Department of Revenue is offering an amnesty program between October 1, 2019 and November 15, 2019. If eligible tax liabilities are paid in full during this period, applicable interest and penalties will be waived. Eligible liabilities are taxes due from periods ending after June 30, 2011 and prior to July 1, 2018. Some taxes are excluded from the amnesty program, including: taxes not collected by the Department of Revenue, such as property, estate, franchise and insurance taxes, and local taxes paid directly to local government agencies; any balance due on returns for periods ending on or before June 30, 2011, and on or after July 1, 2018; IFTA liabilities; motor fuel use tax, and any liabilities that are not considered taxes (i.e., licensing fees, tire user fees, motor fuel violations, permits and some surcharges). For more information, review Informational Bulletin FY 2020-05, 2019 Illinois Tax Delinquency Amnesty Act

Businesses who are interested in taking advantage of this amnesty program should act quickly since there is a limited amount of time to file returns, make corrections and pay the tax due. Amnesty programs are not always the best option for businesses despite the benefits of waiving interest and penalties on tax liabilities. If you have questions about this program and potential advantages and disadvantages of amnesty, you can contact a member of our State and Local Tax team using the Contact Form below. Be sure to indicate “Illinois Amnesty” in Your Message and a member of our team will contact you to discuss your questions.

Supreme Court Overturns Quill

On June 21, 2018, the U.S. Supreme Court issued a pivotal decision in South Dakota v. Wayfair, Inc., overturning the physical presence standard previously established in Quill Corp. v. North Dakota (1992). This requirement prevented state and local taxing authorities from imposing sales tax collection requirements on out-of-state sellers who did not have physical presence in their jurisdictions. Due to the exponential growth of internet commerce, the states have lost a significant amount of tax revenue, as their residents chose to purchase products from out-of-state sellers who were not required to collect tax on their sales, rather than in-state retailers. To combat this issue, South Dakota passed legislation in 2016 requiring out-of-state sellers who engaged in more than 200 or more separate transactions or exceeded $100,000 of annual sales in the state, to register and collect tax. The intent of this legislation was to bring a challenge to Quill’s physical presence standard at the Supreme Court. A number of other states have passed similar legislation in the past two years as well.

In its decision, the Court held that the physical presence standard established in Quill is “unsound and incorrect.” The majority opinion (5-4) authored by Justice Anthony Kennedy states that Quill is flawed on its own terms, and that the physical presence rule is not a necessary interpretation of the requirement that a state tax must be applied to an activity with substantial nexus with the taxing state. The opinion furthers states that Quill creates, rather than resolves, market distortions; and it imposes the sort of arbitrary, formalistic distinction the Court’s modern Commerce Clause precedents disavows.

This decision does immediately open the door for states to start imposing sales tax collection requirements on out-of-state sellers, as the Court remanded the case to the South Dakota Supreme Court to decide whether any other principles of Commerce Clause doctrine may render the State law unconstitutional. However, the majority opinion noted that South Dakota’s law included several features that appear designed to prevent discrimination against or undue burdens upon interstate commerce; therefore, it is unlikely any further challenges may be raised.

Stay tuned to Tronconi Segarra & Associates for more information on how this decision changes the landscape of sales tax collection, and how it potentially impacts your business’ sales tax filing requirements across the United States.

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