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Thirty-three states have now enacted marketplace facilitator laws, leaving only a dozen that impose a general sales and use tax yet to act — and legislation is moving in five of them.
It might be easiest to start with the 12 sales tax states without marketplace facilitator laws, which are Florida, Georgia, Kansas, Louisiana, Massachusetts, Michigan, Mississippi, Missouri, North Carolina, Ohio, Tennessee, and Wisconsin. Proposals are live in five of those states:
- North Carolina General Assembly conference committee members on June 25 announced a budget compromise that includes marketplace facilitator economic nexus thresholds of more than $100,000 in facilitated sales or 200 transactions into the state. These marketplace facilitator requirements had also appeared in each chamber’s version of the budget. The governor, however, is unhappy with unrelated provisions and is expected to veto the current compromise should the General Assembly approve it.
- Ohio’s Senate on June 20 asked for the appointment of a conference committee on the state’s budget bill, H.B. 166. Both chambers approved economic nexus thresholds for marketplace facilitators of more than $100,000 in aggregate gross receipts from their own or from facilitated sales of tangible personal property or services in the state, or 200 separate transactions into the state. The Senate version at one point contained a sales threshold of in excess of $500,000, but senators revised that figure down.
- In Wisconsin, A.B. 251, a marketplace facilitator collection measure introduced on May 31, is moving quickly through the Legislature; the bill has already received State Assembly approval and is pending in the State Senate.
- In Massachusetts, a conference committee has been appointed on H. 3801, the state’s budget bill, which would impose sales and use tax collection requirements on marketplace facilitators and allow the revenue commissioner to set the economic nexus sales threshold. For reference, the Department of Revenue in 2017 promulgated regulations requiring remote sellers with more than $500,000 in sales or 100 transactions into the state to collect tax; the current language in H. 3801 would allow the commissioner to reduce that economic nexus threshold to sales in excess of $100,000.
- In Michigan, a package of bills was referred to the House Ways and Means Committee on June 19 that would codify the state treasury’s guidance on the U.S. Supreme Court’s decision in South Dakota v. Wayfair Inc. and extend collection requirements to marketplace facilitators exceeding $100,000 in facilitated sales of tangible property or services in the state or 200 or more separate transactions into the state.
The 33 states that have enacted marketplace facilitator requirements are Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Maine, Maryland, Minnesota, Nebraska, Nevada, New Jersey, New Mexico, New York, North Dakota, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Texas, Utah, Vermont, Virginia, Washington, West Virginia, and Wyoming.
Map of Bills In Effect, Going into effect July 1, and Newly Passed (plus above proposals) See full list here.
Now in Effect
Next, it might be helpful to turn to Amazon.com, which considers marketplace facilitator collection requirements to be in effect in the following 14 states and the District of Columbia: Alabama, Connecticut, Idaho, Iowa, Minnesota, Nebraska, New Jersey, New York, Oklahoma, Pennsylvania, South Carolina, South Dakota, Vermont, and Washington.
Tracking which states Amazon publicly acknowledges as having marketplace facilitator laws in effect is important for at least two reasons: “In 2017, for the first time in our history, more than half of the units sold on Amazon worldwide were from our third-party sellers,” founder Jeff Bezos said in an April 2018 letter to Amazon shareholders. Also, while Amazon collects and remits tax on its own sales in all states with a sales and use tax, it does not do so on third-party sales unless a state has enacted legislation putting the collection obligation on the marketplace facilitator.
Ten states enacted marketplace facilitator laws before the start of the 2019 legislative session: Alabama, Connecticut, Iowa, Minnesota, New Jersey, Oklahoma, Pennsylvania, Rhode Island, South Dakota, and Washington.
But Amazon does not include Rhode Island on its list of states imposing marketplace facilitator collection requirements. That might change starting July 1, when Rhode Island S. 251-A eliminates the option for marketplace facilitators and remote sellers to comply with notice and reporting requirements. Marketplace facilitators with more than $100,000 in annual sales or 200 or more separate transactions into the state will instead be required to collect tax on third-party sales. The state Division of Taxation has issued a reminder and FAQs on the new requirements.
South Dakota’s marketplace facilitator requirements were adopted in 2018 during a special session after the Wayfair decision came out, but S.B. 2, which contains the same economic nexus thresholds that the state applies to remote sellers, took effect March 1.
Nebraska L.B. 284, which imposes collection requirements on marketplaces facilitating sales in excess of $100,000 or 200 separate transactions in the state, took effect April 1.
New York S. 6615, signed into law June 24, increases from $300,000 to $500,000 one of the state’s economic nexus thresholds for marketplace facilitators enacted just two months earlier. S. 1509-C/A. 2009-C, signed in April, required marketplace facilitators to collect tax on facilitated sales of tangible personal property when the cumulative total gross receipts of such facilitated sales exceed $300,000 or the marketplace facilitates more than 100 transactions in the state. S. 6615 increases the threshold to more than $500,000 in facilitated sales of tangible personal property. The original thresholds took effect June 1; the updated threshold took effect immediately.
Vermont H. 536, which took effect June 1, clarifies that marketplace facilitators are vendors required to collect tax under the state’s economic nexus thresholds of at least $100,000 in sales in the state or 200 individual transactions into the state.
Idaho H. 259 also took effect June 1. It requires marketplace facilitators to collect tax when third-party sales into the state exceed $100,000; there is no transaction threshold. The law excludes from the collection obligation any local sales taxes.
Note that South Carolina is on Amazon’s current list. South Carolina’s chief administrative law judge is due any day to issue an opinion in Amazon Services LLC v. South Carolina Department of Revenue. This is the case in which the DOR assessed tax, arguing that under long-standing state law, Amazon Services LLC is the retailer legally liable for collecting use tax on third-party sales into the state over Amazon’s marketplace platform. The amount of uncollected tax continues to accumulate, with the DOR estimating that Amazon will owe the state $500 million by the end of the litigation.
South Carolina S. 214 defines “marketplace facilitator” and further informs online marketplace providers of their existing obligation to collect tax on third-party sales into the state. Amazon recognizes these requirements as taking effect on April 29. Revenue Director Hartley Powell said last year that such legislation would ensure that marketplace facilitators start complying with the state’s requirements, while the measure’s fiscal note said that should Amazon ultimately prevail in the litigation, the new law would essentially “replace an adverse finding.”
For those keeping an eye on the courts, Walmart.com has just filed its opening brief with the Louisiana Supreme Court in its suit challenging Jefferson Parish’s application of collection requirements to the marketplace facilitator; the jurisdiction argues that the marketplace facilitator is the dealer of sales by its third-party sellers. At press time at least eight amici had filed briefs in support of Walmart.
Taking Effect July 1
New marketplace facilitator provisions are scheduled to take effect July 1 in seven states:
- Arkansas S.B. 576 requires remote sellers and marketplace facilitators to collect tax if they have aggregate sales of tangible personal property, taxable services, digital codes, or specified digital products in the state exceeding $100,000 or 200 transactions.
- Indiana H.B. 1001 contains thresholds for marketplace facilitators of annual sales exceeding $100,000 or more than 200 separate transactions.
- Kentucky H.B. 354 imposes economic nexus thresholds on marketplace facilitators with more than $100,000 in gross receipts from facilitated sales or 200 or more separate transactions in the state. The state DOR issued a June sales tax update on the newly enacted changes.
- New Mexico H.B. 6 requires marketplace facilitators with at least $100,000 in gross receipts in the state to collect tax on third-party sales; the law does not contain a transaction threshold.
- Virginia H.B. 1722 requires marketplaces with more than $100,000 in annual gross revenue from facilitated sales or at least 200 transactions in the state to collect tax. Virginia — an origin-based sourcing state — will allow marketplace facilitators to use destination-based sourcing in some circumstances under informal guidelines.
- West Virginia H.B. 2813 requires marketplace facilitators to collect tax on third-party sales when they have $100,000 in sales or 200 separate transactions in the state. The State Tax Department has issued an administrative notice on the new requirements.
- Wyoming H.B. 69 requires marketplace facilitators to collect and remit tax on all third-party sales to customers in the state.
Three states — Pennsylvania, Rhode Island, and Washington — enacted marketplace facilitator requirements before the 2019 legislative sessions but have updated some provisions, which also take effect July 1.
Rhode Island, discussed above, and Pennsylvania are eliminating their optional notice and reporting requirements effective July 1. The Pennsylvania DOR announced this post-Wayfairchange in January in Sales and Use Tax Bulletin 2019-01.
Washington, meanwhile, already requires marketplace facilitators to collect tax on third-party sales in the state. However, effective July 1, marketplace facilitators must start providing their third-party sellers with monthly gross sales information for all their Washington sales; this information is for business and occupation tax purposes. Those marketplace facilitators that fail to provide this information to their third-party sellers with sales in the state will no longer qualify for liability relief. Washington S.B. 5581 also contains a definition of marketplace and clarifies the state’s definitions of marketplace facilitator and affiliated person.
Newly Signed Laws
For those keeping score: Of the 33 states that have enacted marketplace facilitator laws, Amazon recognizes 14 as already having collection requirements in effect; Rhode Island, which is not on that list, eliminates its option to elect to comply with notice and reporting requirements on July 1. New marketplace facilitator laws are set to take effect July 1 in seven more states.
That leaves 11 states with newly signed marketplace facilitator laws that take effect on October 1 at the earliest. They are Arizona, California, Colorado, Hawaii, Illinois, Maine, Maryland, Nevada, North Dakota, Texas, and Utah.
Arizona H.B. 2757 requires marketplace facilitators to collect and remit tax on sales made through their platforms if their gross retail proceeds or income exceed $100,000 annually, effective October 1. The law has a novel de-escalating sales threshold for remote sellers: Only remote sellers with at least $200,000 in sales in the state will be required to collect the transaction privilege tax in 2019; that threshold drops to $150,000 in 2020, and to $100,000 in 2021 and all later years.
California A.B. 147 revises the definition of doing business in the state to include retailers with total annual combined sales in the state above $500,000, without regard to the number of transactions. The marketplace facilitator collection obligations take effect October 1. Also, the definition of a marketplace facilitator includes the facilitator’s related entities.
Colorado H.B. 19-1240 requires marketplace facilitators to collect tax on behalf of third-party sellers, effective October 1. The law codifies the DOR’s destination sourcing rule for state sales tax collection and for sales taxes imposed by local governments, but allows small retailers to source sales to the business’s location until the state provides an online geographic information system for the remote seller.
Hawaii S.B. 396, which takes effect January 1, 2020, requires marketplace facilitators to collect and remit the state’s excise and use tax on their own and third-party sales. Sovos Compliance LLC explained in a post that Hawaii’s language deems third-party sellers to be making wholesale sales to their marketplace facilitators. “This characterization is hugely important as in Hawaii wholesale sales are subject to a 0.5 percent General Excise Tax (GET). Therefore, under the new marketplace law, the state will collect 4 percent GET from marketplace facilitators and an additional 0.5 percent from marketplace sellers that meet the Hawaii economic nexus threshold,” wrote Erik Wallin of Sovos.
Illinois S.B. 689 requires marketplace facilitators to collect and remit the state’s use tax on third-party sales in the state starting January 1, 2020, when they facilitate $100,000 in sales of tangible personal property or taxable services or 200 or more separate transactions in the state.
Maine L.D. 1452 places collection obligations on marketplace facilitators with more than $100,000 in gross sales from delivery of tangible personal property or taxable services or 200 separate transactions in the state. The act applies to sales occurring on or after October 1.
Maryland H.B. 1301 amended the state’s definition of vendor so that marketplace facilitators will be required to collect tax, effective October 1.
Nevada A.B. 445 imposes collection requirements on marketplace facilitators exceeding $100,000 in sales or making 200 or more separate transactions in the state, effective October 1. The Department of Taxation is authorized to adopt regulations for marketplace referrers meeting the thresholds to either collect tax or comply with notice and reporting requirements.
North Dakota S.B. 2338 prohibits marketplace facilitator liability for tax on third-party sales into the state before October 1. The collection requirements will apply to marketplaces facilitating more than $100,000 in gross sales in the state; the state earlier this year eliminated its economic nexus transaction threshold.
Texas H.B. 1525 requires marketplace facilitators to collect and remit tax on sales by third-party sellers, effective October 1. The new law clarifies that third-party sales are sourced to the location where the item is shipped or delivered. It doesn’t contain thresholds but provides that the comptroller can adopt rules, including excepting some marketplace providers from some or all of the requirements.
Utah S.B. 168 takes effect October 1. The nexus thresholds for marketplaces are facilitated sales exceeding $100,000 or 200 transactions in the state.
Finally, in Minnesota — the first state to enact marketplace facilitator requirements, which took effect on October 1, 2018 — lawmakers revisited their requirements in a late-May special session. Effective October 1, H.F. 5 adds language to Minnesota’s definition of remote retailers and marketplace facilitators to specify that they are “engaging in the regular or systematic soliciting of sales from potential customers in this state” through traditional and virtual advertisements or other solicitation. Also starting October 1, the state’s economic nexus thresholds for marketplace facilitators are revised to sales exceeding $100,000 or 200 or more transactions in the state — the transaction threshold is currently 100.
To read more and keep up with this topic in the future, don’t forget to check out the Tax Notes Nexus Tracker.