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
For state tax officials, these are taxing times.
Revenue department heads and tax commissioners in virtually every state are huddling with their attorneys in the summer months to consider the implications of a double hit on tax policy changes: the U.S. Supreme Court Wayfair ruling and the new federal tax act ( Pub. L. No. 115-97).
Utah is no different, Charlie Roberts, spokesman for the Utah State Tax Commission, told Bloomberg Tax on July 10. “How to deal in a changing world of tax law and policy is keeping our staffs busy with recommendations to the governor, the Legislature and numerous requests from the public of ‘What does this mean to me?’” Roberts said.
Forty-five states plus D.C. impose a statewide sales tax and are therefore figuring out how to react to the June 21 Wayfair ruling. Montana isn’t one of them. Still, the state Department of Revenue received so many questions from residents and state-based vendors it felt compelled to post a clarifying message on its website after the Wayfair ruling.
“There’s a lot of misunderstanding out there among consumers—they want to know that if they buy something on Amazon, do they have to pay a tax,” Kristan Barbour, spokeswoman for the department, told Bloomberg Tax on July 10. They don’t, she clarified.
The Washington, D.C.-based Tax Foundation said “legislators from nearly every state” contacted it with questions within 48 hours of the high court ruling. On its website, the group reminded everyone that internet purchases weren’t exempt from sales tax before Wayfair, “but in many cases it looked that way to consumers.”
The 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 generally. Quill was a large obstacle that states for years had tried to “kill.”
In the wake of the decision, many states are mulling whether to copycat South Dakota’s economic nexus law, for the dozens that haven’t already done so. New York may be looking to its neighbor to the east, Connecticut, which recently raised its thresholds for when a vendor must collect and remit.
Matthew DiDonato, a managing partner and Northeast State and Local Tax Practice Leader at Grant Thornton LLP, told Bloomberg Tax on July 10 that switching to an economic nexus model could generate at least $150 million more in revenues for the state. The thresholds for imposing tax in the South Dakota law are $100,000 in sales or 200 or more transactions a year, while Connecticut bumped its threshold to $250,000.
The 5-4 majority in Wayfair suggested strongly that South Dakota’s law would pass constitutional muster. But the court stopped short of formally declaring that South Dakota’s law, which dozens of states have mimicked already, was valid in the absence of Quill. The court just made clear that Quill was no longer part of any commerce clause test for when states may impose taxes.
The South Dakota Supreme Court still has to bless the state’s economic nexus model before it can become effective. The state court’s decision is expected in mid-August.
Add North Dakota—the venue for the original Quill case—to the list of states pegging Oct. 1 as the deadline for remote sellers to begin collecting and remitting taxes on transactions by North Dakota buyers. State Tax Commissioner Ryan Rauschenberger told Bloomberg Tax the department chose to simplify the paperwork for out-of-state vendors by imposing compliance obligations at the start of the fourth fiscal quarter.
The department also made clear that sellers who exceed the small seller threshold—$100,000 in sales or 200 transactions—for the first time will be required to register and collect sales tax within 60 days, even if that date is after Oct. 1, he said.
Step away from eBay—that’s the warning of some stock analysts after the Wayfair decision.
A July 10 report from SunTrust Robinson Humphrey, a financial advisory firm, told clients that the firm would be downgrading eBay’s stock to hold from buy because of the high court’s ruling in Wayfair.
However, that concern isn’t echoed by all members of the state and local tax community.
“This report is very out of the blue, and I’m not sure the report is accurate,” Mark Nebergall, president of the Software Finance & Tax Executives Council (SoFTEC), told Bloomberg Tax.
With assistance from Christopher Brown in St. Louis, Ryan Prete in Washington, and Gerald B. Silverman in Albany, N.Y.
To contact the reporter on this story: Tripp Baltz in Denver at firstname.lastname@example.org
To contact the editor responsible for this story: Ryan C. Tuck at email@example.com
Copyright © 2018 Tax Management Inc. All Rights Reserved.
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