State of Wayfair: Taxing Terms in Texas—'Seller’ Versus ‘Retailer’

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By Tripp Baltz

Taxes in Texas

Words and their precise meanings in state statutes are taking on added importance in the wake of the U.S. Supreme Court’s groundbreaking ruling in Wayfair.

The Texas Comptroller’s Office is asking state lawmakers to consider amending definitions of “seller” and “retailer” in light of the ruling. Texas legislators can begin to file bills Nov. 12 in advance of the next regular session, which begins Jan. 8, 2019.

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.

The court stopped short of formally declaring South Dakota’s law valid in the absence of Quill, and the South Dakota Supreme Court still has to bless the state’s economic nexus model before it can become effective. It’s expected to do so in mid-August. 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.

Rhode Island Reminder

The Wayfair ruling prompted Rhode Island to remind remote retailers that seek to collect and remit the state’s taxes they have a number of registration options.

One is to do so directly through the Division of Taxation in the state Department of Revenue, according to a July 6 FAQ document from the division. The other is to register through the Streamlined Sales and Use Tax Registration System, and a third way is through a Streamlined Sales Tax Use Agreement Certified Service Provider, the division said.

Although the document’s aim was to answer questions, it might have created some new ones on the issue of retroactive liability for taxes on sales made prior to the Wayfair decision.

The state’s law requires noncollecting retailers who made $100,000 or more in gross revenue from sales in Rhode Island or had 200 or more transactions in the state to either register for a sales tax permit and collect and remit taxes or comply with various notice requirements on purchases by state buyers.

The law took effect Aug. 17, 2017. The FAQ document said it’s possible that noncollecting retailers could be liable for tax on Rhode Island sales made prior to the Supreme Court decision, a point of agitation for remote vendors. Many professionals in the state and local tax community believe that most states won’t seek retroactive application of their economic nexus laws, but the online retail community remains concerned about the prospect and is watching the issue closely.

With assistance from Aaron Nicodemus in Boston and Paul Stinson in Austin, Texas

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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