Sales Tax Jumpstart February 20, 2019 2.4 CPE …...She is a Certified Implementation Partner and...

Sales Tax Jumpstart

February 20, 2019

2.4 CPE Credits

Presented by the Sales Tax Institute

Speaker:

Diane L. Yetter, Sales Tax Institute

Sales Tax Jumpstart February 13 to April 10, 2019

Before the Class: Please join the webinar 7 minutes before the scheduled time of the call for a prompt start. If you have never used Go To Webinar before please take time today to test your connection before your session here: https://support.logmeininc.com/gotowebinar/help/join-a-test-session-g2w060001 If you have trouble logging on to GoToWebinar, please view the System Requirements: https://support.logmeininc.com/gotowebinar/help/system-requirements-for-attendees-g2w010003. We are aware that some past users have had issues logging in using Internet Explorer or if they have an older version of Go To Webinar installed on their machine. If this is the case you can try uninstalling GoToWebinar and reinstalling or you might want to try an alternative browser. If you continue to have trouble logging on, please call in on the phone using the number and passcode provide in your log-in email from GoToWebinar. You can follow the PDF materials that were sent to you by [email protected]. Day of Class: You will have received a personalized link for each class session to use to log into the webinar. Use this link and do not share the link with anyone else. It helps us monitor attendance and gives us the ability to assist you if there are technical issues. You will be able to listen to the webinar either through your computer or via a telephone connection. This information will also be in your personalized email. If you have not received the dial in information, please contact us immediately at [email protected] for assistance. If you have technical difficulties during the webinar, you will be able to chat online with our technical support through the Go to Webinar application. If you cannot log into Go To Webinar, please call our office at 312-701-1800 x3 for immediate assistance or email [email protected]. Please be aware that it is a violation of our copyright to record the class sessions. CPE Information: Webinar attendees can earn 2.4 hours of CPE credit in the “Taxes” field of study for today’s session. During the webinar, we will use polling questions throughout the scheduled presentation time. In order to receive CPE credit, you will need to participate in the polling questions. After the webinar, you will receive an email from [email protected] containing a link to complete a webinar

evaluation form. To receive CPE credit, you will need to complete the evaluation form online and have participated in the polling questions. The Sales Tax Institute is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.learningmarket.org. Other Sales Tax Institute Courses and Webinars Please visit www.salestaxinstitute.com for more information on the Sales Tax Institute’s live and online course offerings and webinars. The following webinars and live courses are currently scheduled. Visit www.salestaxinstitute.com for additional details and registration and additional offerings. Live Webinars:

February 21, 2019 – Software and Cloud Taxation Decoded March 28, 2019 – VAT Primer: Fast-Track Your Know-How

Live Courses: Advanced Sales and Use Tax Workshop – April 29 – May 1, 2019, Chicago, IL – SOLD OUT Basics of Sales and Use Tax – June 19-21, 2019, Chicago, IL Webinars On-Demand - available anytime: Sales Tax 101 Basic Concepts of Drop Shipments Sales Tax for E-Commerce Effective Audit Defense Techniques Sales Tax Challenges with Services Save Time & Eliminate Guesswork with Effective Tax Research

Diane L. Yetter, CPA, MST Diane L. Yetter is a strategist, advisor, speaker and author in the field of sales and use tax. She is president and founder of YETTER TAX, a sales tax consulting and tax technology firm in business since 1996. She is also the founder of The Sales Tax Institute, a premier think tank that offers live and online courses to educate business professionals about sales and use tax. Diane works with an extensive network of capable partners to deliver a variety of sales tax services ranging from tax technology to tax policy and planning and training. She works with clients of all sizes—from Fortune 10 to small, family-owned companies—in a variety of industries. She is a Certified Implementation Partner and Trainer with Thomson Reuters ONESOURCE Indirect Tax, a Certified Training and TDM Specialist for Vertex, Inc. and a Business Partner of Avalara and VertexCloud. As a speaker, Diane is frequently asked to present to industry groups concerning sales and use tax issues including the Council on State Taxation (COST), Chicago Tax Club, Diversified Communications (IOFM and Accountex), the Institute of Professionals in Taxation (IPT), National Association of Credit Managers (NACM), National Association for Retail Marketing Services (NARMS), Vertex User Conference, Thomson Reuters User Conference, and Avalara. As an author, Diane has written articles concerning sales and use tax issues; was editor for the 1995-1996 edition of the Information Technology Association of America Software & Services State Tax Report and authored Drop Shipments: Taxation, Compliance and Planning and Multistate Guide to Sales and Use Tax: Manufacturing, both published by CCH. She also is the author of the US Sales Tax Chapter for the IBFD VAT Worldwide Research Database. Diane provides answers to sales tax questions on the website www.salestaxsupport.com. She has also appeared as an expert witness. Diane is a member of the AICPA, Illinois CPA Society, Chicago Tax Club, Chicagoland Chamber of Commerce Taxation Committee, Taxpayers’ Federation of Illinois and the Institute of Professionals in Taxation. She is a member of the Practitioner Connection with the Council on State Taxation, and represents client concerns on a number of task forces. Diane was named in Accounting Today’s 100 Most Influential People in Accounting for 2011, 2012, 2017 and 2018. Diane serves on the KU Endowment Association’s Board of Trustees and is a Past Chair of the Dean’s Board of Advisors, University of Kansas School of Business where she is also an adjunct professor, teaching topics on state and local taxation and entrepreneurship. Diane earned a BS in accounting and business administration from the University of Kansas in 1985 and an MS in taxation from DePaul University in 1994. Prior to founding the company, Diane was a state and local tax manager in the Chicago office of Arthur Andersen LLP, the sales and use tax director for the Quaker Oats Company, and a sales and use tax auditor for the Kansas Department of Revenue.

2/20/2019

Copyright © Sales Tax Institute 2019 1

Nexus & Constitutional Provisions | February 20, 2019

Copyright © Sales Tax Institute 1997‐2019

Administrative Announcements

• CPE Credits/Evaluation Forms

• Questions from last week

• Course Materials page: https://www.salestaxinstitute.com/jumpstart20‐course‐materials19


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Nexus and Constitutional Provisions


Nexus

• Level of connection between a taxing jurisdiction and an entity

• Controlled by U.S. Constitution under the Due Process Clause and the Commerce Clause

• Supreme Court has shaped the definition


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Nexus (cont.)

• “Substantial physical presence”• Activities of individuals (such as employees) or presence of property

• Economic Nexus• Sales or transaction level of activity

• Physical presence is still relevant. If you have physical presence in a state, you have nexus and the economic nexus thresholds are irrelevant.


Federal Limitations

• Provides constraints on taxing ability• State law can’t violate constitution

• Not federal law dictating state law• Focuses on commerce between the states


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Equal Protection Clause

• 14th Amendment

• Permits states to impose tax on specific classes of persons, property, or services

• States free to create different classes if non‐discriminatory

• States cannot discriminate against out‐of‐state corporations


Import/Export Clause

• No state to impose imposts or duties on imports or exports

• Prohibits states from laying taxes on imports and exports

• Tax sustained when:• Import is no longer in transit

• Export has not begun transit to foreign destination


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Public Law 86‐272

• Federal Statute that impacts state’s ability to impose a state income tax on an out‐of‐state corporation

• No impact on sales, use, excise, franchise or other non‐income taxes

• This means just because you are registered for sales tax you might not need to be registered for income tax


Public Law 86‐272 (cont.)

• To be protected:• Employee/representative’s activities limited to solicitation of sales of tangible personal property

• Orders for sales are accepted out‐of‐state• Orders filled by shipment or delivery from outside the state


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Public Law 86‐272 (cont.)

• Business may be subject to sales tax, but not income tax depending of level of activity in state

• Franchise taxes and other similar taxes not based on net income are not protected• New Jersey – Franchise Tax• Ohio – Commercial Activity Tax (CAT)• Texas – Margins Tax• Washington – Business & Occupation Tax (B&O)

• States’ efforts with economic nexus for income tax


Commerce Clause

• U.S. Constitution grants Congress power to regulate commerce with foreign nations and among the states.

• Limitation on state power

• Failure of Congress to act • Problems when a state imposes tax on privilege of engaging in interstate commerce

• Nexus created when business maintains a significant presence through a physical presence of people or property or economic activity


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Due Process Clause

• Requires definite link or minimum connection

• Income connected to state related to values connected with the State

• Purposeful directed activities•Magnitude of contacts

• Tax is related to benefits received by business• In essence this is the new threshold after Wayfair


Nexus Cases


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National Geographic

• National Geographic v. California, 430 U.S. 551 (1977)• National Geographic is based in Washington D.C. It made mail order sales into California.

• Within California, National Geographic maintained an office to solicit sales of magazines but not the goods sold through mail order that California was attempting to tax.

• The court found that since the in‐state office was part of the same legal entity as the mail order business, National Geographic maintained an in‐state office which created nexus for all activities by the company.

• Therefore, sales tax was required to be collected on all its taxable sales into California.


Norton

• Norton Co. v. Department of Revenue, 340 U.S. 534 (1951)

• Norton was an out‐of‐state and in‐state business which were two legal entities. Within Illinois it maintained a sales office and employees.

• The court found that nexus existed on part of the business (one legal entity) and not on the other legal entity.

• Norton established nexus with its in‐state legal entity and was required to collect tax on over the counter sales in Illinois and also on orders shipped to Illinois or customer pick‐ups at the Illinois office.

• However, it was not required to collect tax on its mail order sales from the out of state legal entity where the customer had no contact with the in‐state office.


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Scripto

• Scripto, Inc. v. Carson, 362 U.S. 207 (1960)• Scripto made sales into Florida. • Scripto did not maintain any offices or facilities in Florida. Nor did it have any employees located in Florida or visiting Florida to solicit sales.

• Its only activity in Florida was sales solicitation by independent contractors.

• The court found that this activity by independent contractors provided enough presence for the out‐of‐state business that it was required to collect tax on sales into Florida.


Quill

• Quill Corporation v. North Dakota, 112 S.Ct. 1904 (1992)• Catalogues and software in the state• Is economic presence enough for nexus

• Two levels of nexus• Due Process Nexus• Commerce Clause Nexus

oRequires substantial physical presence


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South Dakota v. Wayfair

Copyright © Sales Tax Institute 1997‐201919 Source: NCSL

South Dakota v. Wayfair (cont.)

• On June 21, 2018, in a 5‐4 decision, the Court ruled in favor of South Dakota and overruled Quill and National Bellas Hess

• The Court concluded that “the physical presence rule of Quill is unsound and incorrect.”

• Although the decision found in favor of South Dakota, it was also remanded to the South Dakota Supreme Court to evaluate if the provision meets the other tests for constitutionality.

• Following a special legislative session on September 12, 2018, South Dakota Gov. Dennis Daugaard signed into law a measure that dissolves and lifts the injunction against the collection of sales tax on remote sales for all sellers other than the 3 in the case.


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South Dakota v. Wayfair (cont.)

• South Dakota’s law, and its tax laws generally, minimizes the burden on interstate commerce. • SSTP Full Member state

• Limited rates and rate structure

• Simplistic taxability rules

• Nexus law is prospective from decision


Remote Seller Nexus Legislation


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Click Through Nexus

• Typical Attributes• Minimum sales threshold into state (typical is $10,000)• Commission payment to in‐state resident• Commission payments for successfully completed orders• Applies for online and offline activities

• Is NOT• Click advertising• Banner Ads

•Mimics Scripto decision for independent contractors• New York initiated in 2008



Click Through Nexus: Enacted and Proposed Legislation

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Affiliate Nexus

• Typical Requirements• Remote retailer holds a substantial interest in, or is owned by, an in‐state retailer and the retailer sells the same or a substantially similar line of products under the same or a similar business name, or

• In‐state facility/employee used to advertise, promote, or facilitate sales to an in‐state consumer

• May not require common ownership


Affiliate Nexus (cont.)

• Typical Requirements• May include activities in the state on behalf of the out of state business to benefit the out of state business’ customers

• Shares management, business systems, business practices, or employees with the retailer, or engages in intercompany transactions with the retailer

• In essence overturns Norton


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Affiliate Nexus: Enacted and Proposed Legislation

Economic Nexus

• Typical Attributes• Does not require physical presence • Correlates with a set level of sales or gross receipts activity

• Prohibited under Quill and Commerce Clause• Some states enacted in conjunction with Notice & Reporting as an option to not collect• Georgia, Oklahoma, Pennsylvania, Rhode Island, Washington

• U.S. Supreme Court handed down decision in South Dakota v. Wayfair on June 21, 2018, paving the way for economic nexus to proliferate.


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Economic Nexus

• States have reacted since the decision• Prior legislation with future or delayed effective dates• Prior legislation with litigation• New legislation• New regulations relying on old law• Policy announcements



Economic Nexus: Enacted and Proposed Legislation

N/AProposed in 2019EnactedNo sales tax

District of ColumbiaAlaska

*

* Case pending but new law proposed

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States with Economic Nexus ‐ Thresholds

•Most states’ threshold is $100,000 or 200 transactions

•Most states are using GROSS sales not TAXABLE sales

• Exceptions:• Alabama ‐ $250,000

• Connecticut ‐ $250,000 AND 200 transactions• Georgia ‐ $250,000 or 200 transactions (discussing lowering to $100,000)

• Massachusetts ‐ $500,000 and 100 transactions plus cookie

• Minnesota ‐ $100,000 and 10 sales or 100 transactionsCopyright © Sales Tax Institute 1997‐201931

States with Economic Nexus ‐ Thresholds (cont.)

• Exceptions (cont.):• Mississippi ‐ $250,000

• New York ‐ $300,000 and 100 transactions• Oklahoma ‐ $10,000 – notice or collect

• Ohio ‐ $500,000 plus cookie• Pennsylvania ‐ $10,000 – notice; $100,000 ‐ economic

• South Carolina ‐ $100,000• Tennessee ‐ $500,000 (proposed to lower to $100,000 or 200)• Texas ‐ $500,000


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States with Economic Nexus – When to Begin Collecting

•When does the seller need to begin collecting?

• For most states, it is the next transaction once you cross the threshold.

• Exceptions: • California – The day you exceed the threshold• Hawaii ‐ The first filing deadline is based on when the threshold was first met

• Illinois ‐ The retailer shall determine on a quarterly basis whether they meet the criteria for the preceding 12‐month period

• Indiana ‐ Immediately upon reaching the threshold


States with Economic Nexus – When to Begin Collecting (cont.)

• Exceptions (cont.):• Minnesota ‐ On the first taxable retail sale into Minnesota that occurs no later than 60 days after you exceed the Small Seller Exception

• Nevada ‐ Must register by the first day of the calendar month that begins at least 30 calendar days after they hit the threshold.

• New York – Immediately• North Carolina ‐ 60 days after you meet the threshold• North Dakota ‐ 60 days after you meet the threshold• Oklahoma ‐ On or before July 1, 2018, and on or before June 1 of each calendar year thereafter, beginning June 1, 2019


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States with Economic Nexus – When to Begin Collecting (cont.)

• Exceptions (cont.):• Pennsylvania ‐ On or before June 1 of each calendar year for $10,000 threshold

• South Carolina ‐ The first day of the second calendar month after economic nexus is established

• Tennessee ‐ The first day of the third month following the month in which the dealer met the threshold

• Texas ‐ The first day of the fourth month after the month in which the seller exceeded the safe harbor threshold

• Washington ‐ The first day of the month that starts at least 30 days after you meet the threshold


States with Economic Nexus – Measurement Date

•What is the period for assessing the threshold?

• For most states, it is the previous or current calendar year.

• Exceptions: • Alabama – previous calendar year• Connecticut – the 12‐month period ending on September 30 immediately preceding the monthly or quarterly period with respect to which such person’s liability for tax under this chapter is determined

• Illinois ‐ preceding 12‐month period• Massachusetts ‐ For each calendar year beginning with 2018, if during the preceding calendar year.


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States with Economic Nexus – Measurement Date (cont.)

• Exceptions: • Michigan – previous calendar year• Minnesota ‐ The 12‐month period ending on the last day of the most recently completed calendar quarter

• Mississippi ‐ Prior twelve month period• Nebraska – current calendar year• New York ‐ immediately preceding four sales tax quarters• Oklahoma ‐ immediately preceding twelve‐calendar‐month period• Pennsylvania ‐ in the previous 12‐month period; Previous calendar year for 7/1/19 legislation


States with Economic Nexus – Measurement Date (cont.)

• Exceptions: • Rhode Island ‐ in the immediately preceding calendar year

• Tennessee ‐ During the previous 12‐month period

• Vermont ‐ any 12‐month period preceding the monthly period at issue

• West Virginia ‐ Calendar year 2018. Vendor responsibility will be determined annually each year thereafter.

• If you no longer meet the threshold, what do you do?


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States with Economic Nexus – Type of Sales Included

• The following states do not specify gross sales in theirthreshold:


• Alabama (retail)• District of Columbia (retail)• Georgia (retail)• Illinois (retail)• Kentucky (retail)• Minnesota (taxable)• Nevada (retail)

• New Jersey (retail)• North Dakota (taxable)• Oklahoma (taxable)• Rhode Island (taxable)• Utah (taxable)• Washington (retail)

States with Economic Nexus – Effective Date

• Effective January 1, 2018• Ohio – legislation was challenged but complaint has been withdrawn

• Effective July 1, 2018• Hawaii• Maine• Oklahoma (as alternative to notice and reporting)• Vermont

• Effective September 1, 2018• Mississippi


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States with Economic Nexus – Effective Date (cont.)

• Effective October 1, 2018• Alabama• Illinois• Indiana• Kentucky• Maryland• Michigan• Minnesota• North Dakota• Washington ‐ for remote sellers exceeding $100,000/200 transactions

oJuly 1, 2017 – B&O tax ‐ $285,000; January 1, 2018 – Sales tax as alternative to Notice/Reporting ‐ $10,000

• WisconsinCopyright © Sales Tax Institute 1997‐201941


• Effective November 1, 2018• Nevada• New Jersey• North Carolina• South Carolina• South Dakota

• Effective December 1, 2018• Colorado (grace period through May 31, 2019)

• ConnecticutCopyright © Sales Tax Institute 1997‐201942

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• Effective January 1, 2019• District of Columbia• Georgia (as alternative to notice and reporting)• Iowa• Nebraska• New York – effective immediately, could be retroactive to June 21, 2018• Texas (Not enforced until October 1, 2019)• Utah• West Virginia

• Effective February 1, 2019• Wyoming

• Effective April 1, 2019• California



• Additional state effective dates• Louisiana – TBD with 30 days notice• Massachusetts – October 1, 2017 – challenged but no stay

• Pennsylvania – April 1, 2018 – TPP; April 1, 2019 – digital as alternative to Notice/Reporting; July 1, 2019

• Rhode Island – August 17, 2017 (as alternative to notice and reporting)• Tennessee – July 1, 2017 – litigation pending, enforcement stayed

• Tool – https://www.salestaxinstitute.com/economic‐nexus‐state‐guide


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States with Economic Nexus – 2019 Proposed Legislation

• 2019 Proposed Economic Nexus Legislation• Arizona – proposed legislation with $100,000/200 transaction threshold. Effective date TBD.

• Arkansas – proposed legislation with $100,000/200 transaction threshold. Effective date TBD.

• California – proposed legislation with $500,000 threshold. Would take effect immediately. Note that California has already enacted economic legislation.

• Georgia – proposed legislation would lower the existing economic nexus threshold from $250,000 to $100,000 on January 1, 2020 and leave the 200 transaction threshold unchanged.

• Missouri – Multiple proposed bills with $100,000/200 transaction threshold.


States with Economic Nexus – 2019 Proposed Legislation (cont.)

• 2019 Proposed Economic Nexus Legislation• Nebraska – proposed legislation with $100,000/200 transaction threshold – October 1, 2019 effective date.

o Note that Nebraska is currently enforcing a $100,000/200 transaction threshold but hasn’t enacted legislation yet. Rather, the state is relying on its current definition of retailer engaged in business.

• New Mexico – proposed legislation with $100,000 threshold – July 1, 2019 effective date

• Tennessee ‐ proposed legislation with $100,000/200 transaction threshold – January 1, 2020 effective date.

• Virginia – multiple proposed bills with $100,000/200 transaction threshold or $250,000 threshold – July 1, 2019 effective date.

• Washington – proposed legislation that would establish a threshold of $100,000, 200 transactions, or physical presence effective from October 1, 2018, through December 31, 2019. Effective January 1, 2020, the threshold would be only $100,000.

o Note: Washington has already enacted economic nexus provisions.Copyright © Sales Tax Institute 1997‐201946

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Marketplace Nexus

• Requires online marketplace facilitator to collect tax on behalf of sellers operating through their systems

• Typical requirements include that the marketplace facilitator collects revenue from the customer and manages multiple activities related to the selling process

• Key provisions relation to collection of sales revenue from customer

•MTC Workgroup (https://bit.ly/2SYvQAH)



Marketplace Nexus: Enacted and Proposed Legislation

N/AProposed in 2019EnactedNo sales tax

District of ColumbiaAlaska

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Impact on Threshold Calculation

• Pennsylvania – For calculating the threshold, seller should use gross sales, excluding marketplace sales for which the marketplace facilitator is collecting the tax.


States with Marketplace Nexus

• Effective August 17, 2017• Rhode Island

• Effective January 1, 2018• Washington

oAmazon & Etsy timely collecting; eBay collecting eff. 1/1/19; Walmart collecting eff. 2/6/18

• Effective April 1, 2018• Pennsylvania – April 1, 2018 for sales of TPP ($10,000 threshold –option to collect or notice), July 1, 2019 mandatory collection ($100,000 threshold)

oAmazon & Etsy timely collecting; eBay collecting eff 7/1/19Copyright © Sales Tax Institute 1997‐201950

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States with Marketplace Nexus (cont.)

• Effective July 1, 2018• Oklahoma – April 10, 2018 election

o Amazon timely collecting; Etsy collecting eff. 8/1/18; eBay collecting eff. 7/1/19;

• Effective October 1, 2018• Minnesota

o Amazon & Etsy timely collecting; Walmart collecting eff. 10/2/18; eBay collecting eff. 1/1/19;

• Effective November 1, 2018• New Jersey

o Amazon timely collecting; Etsy collecting eff. 4/1/19; eBay collecting eff. 5/1/19;

• South Carolina – Amazon has challenged the marketplace legislation. o Etsy collecting eff. 2/1/19



• Effective December 1, 2018• Connecticut

oAmazon collecting; Etsy collecting eff. 2/1/19; eBay collecting eff. 4/1/19;

• Effective January 1, 2019• Alabama

oAmazon collecting; eBay collecting eff. 7/1/19; Etsy collecting eff. 7/1/19• Iowa

oAmazon collecting; eBay collecting eff. 2/1/19; Etsy collecting eff. 2/1/19

• Effective March 1, 2019• South Dakota

o Etsy collectingCopyright © Sales Tax Institute 1997‐201952

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• Effective April 1,2019• District of Columbia

o Etsy collecting (others haven’t announced yet)

• Pennsylvania – for digital goods ($10,000 threshold – option to collect or notice)

• Additional state effective dates• Arizona – Ruling issued September 20, 2016 but not enforced



• 2019 Proposed Marketplace Nexus Legislation• Arizona – Proposed legislation would clarify marketplace facilitator role

• Arkansas – Effective date TBD in proposed legislation• California – October 1, 2019 effective date in proposed legislation• Hawaii – January 1, 2020 effective date in proposed legislation• Indiana – July 1, 2019 effective date in proposed legislation• Missouri ‐ Effective date TBD in proposed legislation

• Nebraska – July 1, 2019 effective date in proposed legislation• New Mexico – July 1, 2019 effective date in proposed legislation

• New York – September 1, 2019 effective date in proposed legislationCopyright © Sales Tax Institute 1997‐201954

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• 2019 Proposed Marketplace Nexus Legislation• North Dakota ‐ October 1, 2019 effective date in proposed legislation• South Carolina – proposed legislation that would clarify sales and use tax collection requirements for marketplace facilitators. Effective upon Governor’s approval. Note: South Carolina has already enacted marketplace nexus provisions.

• Texas – October 1, 2019 effective date in proposed legislation• Vermont – July 1, 2019 effective date in proposed legislation• Virginia – July 1, 2019 effective date in proposed legislation• West Virginia – July 1, 2019 effective date in proposed legislation• Wyoming ‐ July 1, 2019 effective date in proposed legislation


Marketplace Litigation

• South Carolina – The state has assessed Amazon for uncollected back taxes, interest and penalties on third‐party sales from a three month period, which Amazon has challenged. An administrative hearing was recently held. (Amazon Services, LLC vs. South Carolina Department of Revenue, June 21, 2017;Administrative hearing held February 4, 2019)

• Louisiana – An appellate court found that Walmart was held liable for Jefferson Parish local sales taxes on third‐party sales. Jefferson Parish does not have any marketplace facilitation collection legislation. (Normand v. Wal‐Mart.com USA, LLC, December 27, 2018)


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Reporting Requirements

• Colorado enacted effective March 1, 2010 following QuillDue Process discussion• Challenged in state and federal courts• Case heard in U.S. Supreme Court on whether case could be heard in federal court and whether Tax Injunction Act applied

oFound Tax Injunction Act didn’t apply as law didn’t involved collection of tax

oJustice Kennedy statement leads to South Dakota legislation and Wayfair case

• 10th Circuit Court with Justice Gorsuch found constitutional


Reporting Requirements

• Typical Attributes• Prohibits advertising no tax applies• Retailer must notify customers of use tax obligation

• Retailer may be required to send purchasers an annual statement of their purchases

• Retailer may be required to send an annual report to state DOR

• Thresholds may apply

• Penalties may apply


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Reporting Requirements (cont.)

• 3 different categories of legislation • Retailers aren’t allowed to advertise that no sales tax is due

• Retailers must notify purchasers of their use tax obligation, but no penalties for non‐compliance

• Retailers must notify purchasers of their use tax obligation, send annual summaries of customer purchases to customers, and file customer information reports with the DOR and penalties apply for noncompliance



Reporting Requirements: Enacted and Proposed Legislation

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States with Reporting Requirements

• Effective July 1, 2017• Alabama – never really enforced• Colorado ‐ with penalties: $5 for each sale that doesn’t include required notice; $10 for each notice not sent to the purchaser

• Louisiana – no penalties but could assess costs of enforcement• Vermont (also May 24, 2011 with no penalties) – with penalties: $10 for each notice not sent to the purchaser

• Effective August 17, 2017• Rhode Island – with penalties: $10 for each failure to comply with the requirements, but not less than a total penalty of $10,000 per calendar year.


States with Reporting Requirements

• Effective January 1, 2018• Washington – with penalties: $20,000 for failure to provide notice to consumers on each order and on their marketing and sales materials – can be assessed once per year. Additional penalties ranging from $5,000 to $100,000 plus $20,000 for each $50,000 in sales above $300,000 in sales for failure to issue the annual notice to consumers must be assessed. The penalty for failure to provide the annual statement to the Department will be assessed at $25 per consumer not included in the report with a minimum penalty of $20,000.

o Penalty Waiver Program

• Effective April 1, 2018• Pennsylvania – for sales of TPP – with penalties: $20,000 or 20% of the total sales in Pennsylvania during the previous twelve months, whichever is less, for failure to comply – may only be assessed once in a calendar year.


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States with Reporting Requirements (cont.)

• Effective July 1, 2018• Oklahoma – June 9, 2010; November 11, 2016; April 10, 2018 with penalties: $20,000 or 20% of the total sales in Oklahoma during the previous twelve months, whichever is less, for failure to comply – may only be assessed once in a calendar year.

• Effective December 1, 2018• Connecticut – no specific penalties for non compliance

• Effective January 1, 2019• Georgia – with penalties: $5 for each failure to provide notice at time of sale; $10 for each failure to send statement to purchaser; $10 for each failure to file copy of statement with the DOR.

• Iowa – with penalties: $5 for each failure to provide notification to purchaser; $10 for each failure to provide purchaser with periodic report; $10 penalty x the # of purchasers for whom info should have been but was not included in annual report to the DOR.

• Effective April 1, 2019• Pennsylvania – for digital goods – with penalties: $20,000 or 20% of the total sales in Pennsylvania during the previous twelve months, whichever is less, for failure to comply – may only be assessed once in a calendar year.


States with Reporting Requirements (cont.)

• Additional state effective dates – only web notices and no penalties• Kentucky – July 1, 2013• South Dakota – July 1, 2011• Tennessee – March 26, 2012


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Sales Tax Institute Resources

• Remote Seller Nexus Chart: https://www.salestaxinstitute.com/resources/remote‐seller‐nexus‐chart

• Remote Seller Resources Page: https://www.salestaxinstitute.com/resources/remote‐seller‐resources


Federal Activity

• Protecting Businesses from Burdensome Compliance Cost Act of 2018/2019 • Prohibits collection or reporting if no physical nexus before date of act

• After act allowed if:oState has enacted a statuteoUniform rate imposed by the stateoSingle location reporting within a stateoNo individual purchaser reporting

• Effective date January 1, 2020


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Federal Activity

• Prior Bills that did not pass• Marketplace Fairness Act (MFA) of 2017

• Remote Transactions Parity Act (RTPA) of 2017

• No Regulation Without Representation Act of 2017

• Stop Taxing Our Potential Act of 2018• Online Sales Simplicity and Small Business Relief Act of 2018


Practical Applications of Nexus


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Practical Applications of Nexus

• Evaluate your activities ‐ people and property• Evaluate remote seller legislation

• Determinate level of activity and visibility

• Evaluate economic impact


Practical Applications of Nexus (cont.)

• Have nexus and are not registered• Nexus requires collection• Statute of Limitation issues

• Registration process evaluation• Customer Inquiries

oExemption Certificates for exempt sales

oAudits

oUse Tax Paid


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• Have nexus and are not registered• Voluntary Disclosure• MTC ‐ National Nexus Program

• Amnesty Programs ‐ For updated list of current amnesty programs visit https://www.salestaxinstitute.com/resources/sales‐tax‐amnesty

o Indiana for sellers with inventory in state

o Illinois limited program for sellers with inventory in state

• Illegal to collect taxes before registering



• No Nexus?• Cancel registration• Voluntary Filer

• Not registered?• Notice & Reporting requirements

• Use Tax alerts to customers


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https://www.salestaxinstitute.com/resources/sales-tax-amnesty

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Determining Whether You Need to Collect Sales Tax – Next Steps

• Gather your data ($ amount of sales, # of sales into a state, any physical presence)

• Figure out where you have collection responsibility• Compare it against the state legislation

• Determine the taxability of what you’re selling

• Register in the state(s) if needed•Make sure you have some sort of calculation system and compliance process


Questions?Complete Evaluation Survey


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Homework & Next Week


Homework

• Complete Nexus Questionnaire for your company• https://www.salestaxinstitute.com/jumpstart20‐course‐materials19

• Using information from today’s class and the data from your company identify where you are required to be registered

• Compare results against where you are registered

• Bring your questions to next week’s class for debrief or post in Linked In group for classmate’s input


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Tools

• Remote Seller Nexus Chart ‐https://www.salestaxinstitute.com/resources/remote‐seller‐nexus‐chart

• Economic Nexus Chart ‐https://www.salestaxinstitute.com/economic‐nexus‐state‐guide

• Amnesty Chart ‐https://www.salestaxinstitute.com/resources/sales‐tax‐amnesty

• Nexus Questionnaire• Nexus White Paper


Next Week and Upcoming Office Hours

• Industry Digital Roundtable• Self‐paced – watch as many videos as interest you• Regular streaming class will NOT meet next week

• Office Hours – Tuesday, March 5, 12:00‐1:00 EDT• Open session to address any questions from first 3 weeks of class• Focus will be on processes and understanding of concepts that need clarification

• Submit questions in advance to [email protected] or will be able to ask questions during session.

• Recommend all attend so you can hear what questions people are asking


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https://www.salestaxinstitute.com/resources/sales-tax-amnesty

https://www.salestaxinstitute.com/resources/remote-seller-nexus-chart

https://www.salestaxinstitute.com/economic-nexus-state-guide


2/20/2019


Thanks to our Sponsors!


Get Social with Sales Tax Institute


@SalesTaxInst

/company/sales‐tax‐institute

/user/salestaxinstitute

Sales Tax Institute910 W. Van Buren, Suite 100‐321Chicago, IL 60607(312) 701‐1800

[email protected]/salestaxinstitute

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Sales Tax Jumpstart February 20, 2019 2.4 CPE …...She is a Certified Implementation Partner and...

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