Sales Tax Requirements: One Year After Landmark Wayfair Decision

Posted on 06.04.19

Sales Tax Requirements: One Year After Landmark Wayfair Decision

By Terry Barrett, CPA | Tax Senior Manager | State and Local Tax Team

The Wayfair Decision Impact: One Year Update

Almost one year has passed since the U.S. Supreme Court ruled in South Dakota v. Wayfair, 585 U.S. ___ (2018), that states may require remote sellers (those without a physical presence or connection with a state) to collect the states’ sales/use tax on sales to instate customers. The Court’s ruling sent states clamoring to adopt/enforce “economic nexus” standards in order to begin capturing tax revenues from sales that had escaped their reach due to former “physical presence” or connection requirements previously adopted by the Court in 1992 in the Quill case.  The ruling also resulted in remote sellers clamoring to determine their potential sales/use tax requirements in the states and to address complicated tax compliance issues.

Since the Court’s ruling on June 17, 2018, all states that impose sales/use taxes[1] and the District of Columbia, have taken steps to impose tax collection requirements on remote sellers with sales above certain thresholds to consumers in their states – whether through new legislation, policy pronouncements, or enforcement of previously enacted legislation that had been on hold pending the outcome of the Wayfair case.  Only a few states, Florida, Missouri, Arizona, and Kansas, have not yet enacted remote seller requirements.  To date, it appears Arizona may pass legislation in the near term but Kansas and Florida both have rejected the legislation for now.  Many of the states have also enacted marketplace facilitator/provider tax collection requirements.


Our previous blogs on economic nexus and the Wayfair decision provided a summary of the effective dates of the states’ legislation and policies. The following is a quick update on the states and effective dates:

Effective date of July 1, 2019: Arkansas, Idaho, New Mexico, Tennessee, and Virginia

Key Changes in Economic Nexus Thresholds

California

  • California changed its threshold for compliance from $100,000 in sales to $500,000 in sales to California customers, with an effective date of April 1

Georgia

  • Georgia’s threshold will drop from $250,000 in annual sales to $100,000 beginning January 1, 2020, and Georgia has eliminated its notice and reporting option effective April 28, 2019.

Washington 

  • Washington revised its threshold by dropping the 200 separate transactions provision effective March 4, 2019.

Additional changes are expected among the states with the remote seller/marketplace facilitator requirements over time.


Virginia 

Virginia’s remote seller legislation will require any dealer that in the current or previous calendar year receives more than $100,000 in gross revenue from retail sales, or engages in 200 or more separate transactions, to collect Virginia sales/use tax beginning July 1, 2019.  This threshold requirement only relates to dealers that currently are not otherwise required to be registered with the Department of Taxation.  Thus, those dealers with a physical presence in the state who traditionally have been required to register for and collect/report the tax continue to be subject to their same, traditional requirements.

Virginia will also impose tax collection requirements on marketplace facilitators/providers who sell to or facilitate sales on behalf of third party sellers to Virginia consumers. 

With the change in Virginia law, presumably more remote sellers will be collecting Virginia use tax.  In addition, marketplace facilitators generally will be required to collect the use tax on sales through their marketplaces.  With these additional tax collection efforts, over time presumably Virginia businesses will be relieved of some of their use tax reporting responsibilities.  This is not to say they will not have some use tax to report, but rather may have less to report.  Virginia businesses should still remain diligent in monitoring sales/use tax payments to ensure that the proper tax is paid to suppliers or is being self-assessed and reported to the Department of Taxation.


The Department of Taxation recently issued guidelines which provide details as to the exact remote seller and marketplace facilitator tax requirements under the new law as well as helpful examples.

Questions on the latest sales tax requirement updates? Reach out to your Keiter advisor or a memeber of the State and Local Tax team for assistance. We're happy to help.


[1] The states that do not impose state level sales/use tax are Alaska, Delaware, Montana, New Hampshire, and Oregon.

The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.

Posted by: Terry Barrett, CPA

Terry Barrett specializes in state and local tax concerns for her clients. She has over 30 years of experience working in the public and private accounting sector. She is a graduate of Virginia Commonwealth University. You can read more of Terry’s state and local tax insights here.

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