Wayfair: Emergency rule in Maryland … and a whole lot more
There’s been lots of movement on the Wayfair front lately.
Wayfair — that’s the U.S. Supreme Court’s decision to strike down a 1992 ruling that established a physical presence threshold for when states could tax remote sales.
So what's going on? Let's start with this:
State of Wayfair: Maryland adopts emergency rule This comes straight from Bloomberg BNA:
"Maryland has approved emergency rules on remote sales, requiring vendors with more than $100,000 in sales or 200 transactions into Maryland to collect and remit beginning Oct. 1.
"The rules will remain in effect until March 30, 2019, after which permanent regulations — currently winding their way through the normal rulemaking process — will take effect, Joseph Shapiro, spokesman for the Maryland Office of the Comptroller, told Bloomberg Tax on Aug. 29. The office is drafting a tax alert that will be published after feedback is received from the public."
Maryland's approach to 'economic nexus' This information comes from Karen Syrylo, a member of the MACPA's Board of Directors and its State Tax Committee. I don't want to get anything wrong, so I'm quoting directly from Karen's recent post on the MACPA's state tax listserv.
"On Sept. 14, two items of information were released regarding Maryland's approach to the sales tax 'economic nexus' standard, i.e. the removal of the physical presence requirement, following the U.S. Supreme Court's June 21 ruling in South Dakota v. Wayfair:
- "The Maryland Register contains the proposed regulations, now in emergency form, and related explanations. This is the same regulation wording I had previously posted on this listserv.
- "The Maryland Comptroller's Office posted on its website a tax alert with further explanation, including helpful examples of how the regulation will be implemented. Note the Oct. 1, 2018 trigger date for vendors to begin tracking their in-state sales. See the posting here.
Some notes from Karen "Several of us from the practitioner community assisted in discussions about the proposed regulation and in drafting the tax alert. I am pleased to report that Maryland has taken what I consider to be the more appropriate and business-friendly / practitioner-friendly approach to starting to implement the new 'economic nexus' standard that was more or less blessed in the Supreme Court's Wayfair decision. Our thanks to Maryland for taking this approach and thus heading off what could have been additional litigation, which I believe other states may be inciting.
"Most important, Maryland's requirement for a vendor to even begin tracking their Maryland sales does not begin until Oct. 1, 2018, and the responsibility to begin charging tax comes even later. While other states are giving recognition to the fact that non-retroactivity was one of the criteria of the South Dakota law that the SCOTUS listed as a reason that the South Dakota law could possibly be acceptable without a physical presence test, some other states are making the tax collection responsibility prospective, but the sales tracking and nexus testing requirement retroactive.
"See, for example, Illinois: 'If a remote seller meets either of the thresholds through its selling activities for the period from Sept. 1, 2017, through Aug. 31, 2018, the remote seller must register with the Department to collect Illinois use tax beginning Oct. 1, 2018.'
"And Michigan: 'This guidance applies prospectively, but the rule requires sellers to review sales from the 2017 calendar year to determine if they have substantial nexus come Oct. 1, 2018. If substantial nexus is established for 2018 under the economic presence test, the seller only incurs tax liability for those sales that occur after Oct. 1, 2018.'
"FYI, for your clients who sell to customers in other states, below is the list I've been keeping of the states' laws and administrative guidance regarding the implementation of Wayfair. Please treat this as information only, and know that it is changing frequently and further developments — including additional laws, administrative pronouncements, and possible litigation — are almost certain (in addition to the retroactivity / instant nexus issue created by the dates. Note the several states that are currently using $10,000 threshold and not the $100,000 South Dakota threshold)."
States with existing economic nexus laws
- Alabama (Jan. 1, 2016), $250,000 in in-state sales
- Connecticut (July 1, 2018), 200 transactions and $250,000 in in-state sales
- Georgia (Jan. 1, 2019), 200 transactions or $250,000 in in-state sales
- Hawaii (July 1, 2018), 200 transactions or $100,000 in in-state sales
- Illinois (Oct. 1, 2018), 200 transactions or $100,000 in in-state sales
- Indiana (July 1, 2017), 200 transactions or $100,000 in in-state sales
- Iowa (Jan. 1, 2019), 200 transactions or $100,000 in in-state sales
- Kentucky (July 1, 2018), 200 transactions or $100,000 in in-state sales
- Louisiana (contingent on Wayfair ruling), 200 transactions or $100,000 in in-state sales
- Maine (Oct. 1, 2017), 200 transactions or $100,000 in in-state sales
- Minnesota (contingent on Wayfair ruling), 100 transactions or $100,000 in in-state sales in at least 10 transactions
- Mississippi (Dec. 1, 2017), $250,000 in in-state sales
- North Dakota (contingent on Wayfair ruling), 200 transactions or $100,000 in in-state sales
- Oklahoma (July 1, 2018), $10,000 in in-state sales
- Pennsylvania (March 1, 2018), $10,000 in in-state sales
- Rhode Island (Aug. 17, 2017), 200 transactions or $100,000 in in-state sales
- South Dakota (contingent on S,D, Sup. Ct. approval, following remand), 200 transactions or $100,000 in in-state sales
- Tennessee (currently on hold due to litigation), $500,000 in in-state sales
- Vermont (contingent on Wayfair ruling, July 1, 2017), 200 transactions or $100,000 in in-state sales
- Washington (July 1, 2017), $10,000 in in-state sales
- Wyoming (July 1, 2017), 200 transactions or $100,000 in in-state sales
States are issuing additional guidance
- Maryland: Emergency regulations approved, nexus is created by $100,000 of in-state revenues or 200 transactions; effective Oct. 1, 2018 and not retroactive. (Note: Maryland is not a “streamlined” state.)
- DC: Nothing released yet.
- Virginia: Nothing released yet.
- Arkansas: Department of Finance and Administration task force proposal, $100,000 or 200 transactions.
- California: Proposed legislation is in draft, $500,000.
- Colorado: Emergency regulation Sept. 12, 2018 -- $100,000 or 200 transactions.
- Idaho: Proposed legislation, HB578 for click-through nexus.
- Massachusetts: Department announcement: Regulation 830 CMR 64H.1.7 remains in effect.
- Michigan: Revenue Administration Bulleting 2018-16: $100,000 or 200 transactions, effective Oct. 1, 2018.
- Nebraska: Department statement released July 27, 2018: $100,000 or 200 transactions, effective Jan. 1, 2019.
- Nevada: Proposed regulation, $100,000 or 200 transactions.
- New Hampshire: Has no sales tax; proposed legislation would prevent other states’ tax collection by New Hampshire businesses.
- New Jersey: AB4261 passed but vetoed by governor for administrative amendments to be made; $100,000 or 200 transactions.
- North Carolina: Department Directive SD-18-6, $100,000 or 200 transactions, effective Nov. 1, 2018.
- Ohio: Statement issued June 21, 2018 -- statute must be changed.
- South Carolina: Department draft revenue ruling Aug. 10, 2018 - $250,000.
- Tennessee: Department notice August 2018: Department will not enforce economic nexus due to statute requiring legislative review.
- Texas: Department Tax Policy News, July 2018: Physical presence rule still in place until legislative and regulatory actions.
- Utah: Proposed legislation SB2001: $100,000 or 200 transactions.
- Wisconsin: Remote sellers information on website: $100,000 or 200 transactions, effective Oct. 1, 2018.
Legislation to clarify interstate sales tax collection Finally, as Accounting Today reports, "a bipartisan group of lawmakers in the House has introduced legislation to clarify interstate sales tax collection requirements in the wake of the Supreme Court’s decision this year in South Dakota v. Wayfair. ... The bipartisan legislation, known as the 'Online Sales Simplicity and Small Business Relief Act,' aims to provide a more orderly process for states to follow." Read more here.