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.”
Read more here.
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:
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
States are issuing additional guidance
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.
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