States Eye Amazon-Type Marketplaces as High Court Tax Case Looms

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 Ryan Prete

States are moving to require Amazon-type marketplaces to collect sales and use taxes as the U.S. Supreme Court prepares for arguments in the largest state tax case in years.

Alabama and Oklahoma have enacted legislation concerning the collection and remittance of tax by marketplace providers. A handful of other states have pending marketplace measures—including Hawaii, Kansas, and Washington.

The new laws come as the U.S. Supreme Court is set to hear oral argument April 17 in South Dakota v. Wayfair. The case is a direct challenge to the court’s 1992 ruling in Quill Corp. v. North Dakota prohibiting states from imposing sales tax collection obligations on vendors lacking an in-state physical presence.

Max Behlke, director of budget and tax at the National Conference of State Legislatures, told Bloomberg Tax that he expects state efforts to collect tax from marketplace providers to slow as the high court takes on Wayfair. Practitioners expect a decision in the case by June.

“With the upcoming midterm elections, which are looking to be significantly divisive, and with the Wayfair case up for consideration, I expect that states will put this topic on the back burner until next year,” Behlke said. “But regardless of how the court rules in June, I think we will see many marketplace and economic nexus effort by states in 2019.”

Oklahoma: $20.5 Million

Oklahoma Gov. Mary Fallin’s (R) signed H.B. 1019XX into law April 12, requiring marketplace providers—such as Inc., eBay Inc. and Etsy Inc.—to collect tax on third-party transactions facilitated through their platforms. It’s estimated to generate $20.5 million annually, according to an April 4 bill summary.

The measure requires select remote retailers and marketplace facilitators or referrers to collect and remit sales or use tax on items sold into Oklahoma—or comply with notice and reporting requirements established in statute and any required by the state tax authority. Sellers, facilitators, or referrers with aggregate in-state sales of at least $10,000 would be subject to the law.

The law contains notice and reporting requirements and establishes noncompliance penalties—calculated as the lesser of $20,000 or 20 percent of total in-state sales during the previous 12 months.

Alabama’s Simplified Sellers Program

Alabama Gov. Kay Ivey (R) signed legislation April 9 requiring third-party sellers to either collect Alabama use tax on sales into the state or report sales totals to the Department of Revenue.

According to an April 9 press release by Ivey, “the increased tax compliance by third-party online sellers could result in an increase of as much as $40 million annually.”The bill ( H.B. 470), which moved quickly through the state’s Legislature, was signed into a law just over a month after it was formally introduced on March 1. The law in part requires that marketplace facilitators with Alabama retail sales over $250,000 in the past 12 months, either by the facilitator or by third-party sellers, to take one of two measures: facilitators must either participate in the state’s simplified sellers use tax remittance program or report the sales to the DOR and send notifications to customers, starting Jan. 1, 2019. The simplified sellers program requires that eligible out-of-state sellers collect and remit the state and local tax on all sales at a flat rate of 8 percent.

In a statement emailed to Bloomberg Tax, Alabama’s DOR said the new law “will help bring about a competitive balance between brick-and-mortar retailers in Alabama and third-party online sellers, while streamlining the collection of use taxes that are currently due on these online transactions.”

Economic Nexus: States in Hunt

Other states are pushing to boost sales tax revenue with economic nexus threshold proposals. Illinois’ S.B. 2577 would establish a threshold of either $150,000 or 200 separate transactions. If surpassed, vendors selling into the state would be considered as “maintaining a place of business in this State” and would have to collect and remit sales or use tax.

The bill was scheduled for its third Senate reading April 11 and could be voted on any day now, according to Behlke.

In Georgia, an economic nexus proposal ( H.B. 61) that would create a threshold of $250,000 or 200 separate transactions was sent to Gov. Nathan Deal (R) April 5, but it hasn’t been signed.

With assistance from Chris Marr in Atlanta and Paul Stinson in Austin, Texas

To contact the reporter on this story: Ryan Prete in Washington at

To contact the editor responsible for this story: Ryan C. Tuck at

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