State of Wayfair: Did California Just Show its Hand?

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

By Tripp Baltz

States are rushing to handle a surge of taxpayer questions in the wake of the South Dakota v. Wayfair ruling. The process isn’t perfect.

Case in point: California. The state’s tax department inadvertently posted draft tax collection rules for online retailers on its website, then quickly withdrew them.

The unofficial draft, obtained by Bloomberg Tax July 12, indicates the state might copy South Dakota’s law beginning Aug. 1. If that turns out to be the case, it likely would be the earliest collection deadline given by a state—earlier even than South Dakota, which is still waiting for its state Supreme Court to bless the economic nexus model in its statute, expected in mid-August.

The June 21 Wayfair ruling—which tossed out Quill Corp. v. North Dakota, the Supreme Court’s 1992 physical presence threshold for when states could tax remote sales—has many states looking to expand their authority over online sales taxation. The majority in the 5-4 ruling suggested strongly that South Dakota’s law would pass constitutional muster; the statute imposes a tax collection threshold at 200 transactions or $100,000 in in-state sales.

In the wake of the groundbreaking decision, dozens of states that haven’t already done so are mulling whether to copy South Dakota’s law.

Utah Special Session?

Utah is considering holding a special legislative session next week to address several matters of tax policy, including a draft economic nexus bill similar to the South Dakota law.

The draft bill was unveiled during a regular meeting of the Legislature’s Revenue and Interim Taxation Committee July 13. It includes the same tax collection thresholds as South Dakota’s: 200 transactions and $100,000 in in-state sales.

John Valentine, chairman of the Utah State Tax Commission, told the committee there are issues still to be fleshed out by courts, “but until they do, we believe we should try to match up the South Dakota statute as close as we can.”

New Mexico Summit

New Mexico will hold a legislative tax summit in Santa Fe later this month, and the Wayfair decision will be one of several topics on the agenda.

But the state is unlikely to make any changes to its remote seller tax collection laws until after the 2019 legislative session, New Mexico Rep. Jason Harper (R) told Bloomberg Tax. Harper said he also doesn’t anticipate a special session under Gov. Susana Martinez (R), who will leave office this year.

Harper pushed tax reform bills in the past several sessions that included taxing internet retailers. He said the Wayfair ruling will help New Mexico hone in on the best approach the next go-around. “We’re all very excited with the direction given in that ruling,” Harper said.

Volunteers, Anyone?

Nevada is looking for a few good volunteers.

Remote sellers can now voluntarily register and begin collecting and remitting sales tax, Department of Taxation Spokeswoman Stephanie Klapstein told Bloomberg Tax in a July 11 email. The state is still working on its plan and timeline to institute requirements for sales tax collection, she said.

Klapstein said the department hopes to have additional registration guidance on its web site this week or next.

No Headaches in Oklahoma

Paula Ross, spokeswoman for the Oklahoma Tax Commission, said the state doesn’t expect to see a lot of compliance headaches following the Wayfair decision.

“We have been having success with our recent efforts and don’t anticipate a lot of additional compliance issues,” Ross told Bloomberg tax in a July 12 email. “Oklahoma has worked the last several years to bring in additional use tax through some of the top online retailers and we have already seen growth in collections.”

To contact the reporter on this story: Tripp Baltz in Denver at abaltz@bloomberglaw.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bloombergtax.com

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