After ‘Wayfair’, Which States Are Ready to Tax Online Purchases? (1)

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By Ryan Prete

The dust is beginning to settle after the U.S. Supreme Court threw out a major obstacle to states’ ability to tax online sales.

But where do states stand when it comes to implementing the so-called “blueprint” from Wayfair v. South Dakota, outlined by Justice Anthony Kennedy, who authored the landmark June 21 opinion before announcing his intention to retire?

  •  Twenty-one states have an economic nexus model in place like South Dakota’s regime, which the Wayfair suggested was constitutionally valid. Of these, many already have announced plans to start enforcing their laws or will do so as soon as July 1. Several had made their laws contingent on the high court validating the South Dakota law or eliminating the Quill “physical presence” rule, which the high court did in Wayfair. Nine of those states aren’t members of the Streamlined Sales and Use Tax Agreement (SSUTA), which could make them more vulnerable to litigation, according to language in the Wayfair opinion.
  •  Nine states so far have issued or plan to issue guidance to sellers on collection duties, and the state’s potential “next steps,” which could include the implementation of new economic nexus models.
  •  Eighteen states (excluding those that don’t administer a sales tax) don’t have a substantial online sales tax regime in place, including an economic nexus one similar to South Dakota’s.
Bloomberg Tax breaks down the specifics of states’ prolific post- Wayfair responses below, including in Texas—a state without a specific online sales tax regime—where the comptroller announced July 27 that he expects the legislature to address online taxation in early 2019, when it next convenes. Many more are expected to mimic South Dakota and launch at least an economic nexus tax model.

Texas Comptroller Glenn Hegar said that tax revenues from online sales will rise post -Wayfair, but will fall below the $800 million his office estimated in 2015.

Kennedy Retirement Leaves Questions

In the Wayfair opinion, Justice Kennedy suggested a state’s law could pass constitutional muster if:

  •  the state installed a threshold that recognizes a “substantial nexus,”
  •  the state didn’t push for retroactive back taxes, and
  •  the state is a member of the SSUTA.
In Wayfair , Kennedy led a 5-4 majority in throwing out its divisive 1992 rule in Quill Corp. v. North Dakota. Quill, which states like the petitioning South Dakota for years have tried to “kill” through lawsuits and regulation, prohibited states from imposing sales tax collection obligations on vendors lacking an in-state physical presence.

The majority in Wayfair suggested strongly that South Dakota’s law would pass constitutional muster; the state’s model imposes the tax collection threshold at 200 separate transactions or $100,000 in in-state sales. 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.

Accordingly, the South Dakota Supreme Court still has to bless the state’s economic nexus model before it can become effective. Still, many project that states will flock to copy South Dakota’s model.

Kennedy surprised many June 27 by saying he would step down from the high court. For years, Kennedy was a fervent skeptic of the Quill precedent and asked for a case to revisit the rule. Kennedy authored a 2015 concurrence in Direct Marketing Association v. Brohl that was the major spark for the “kill- Quill” movement.

States With Economic Nexus Model (Effective Date), Threshold [Member of SSUTA]

Most states with South Dakota “copycat” laws are either moving ahead with laws or already consider them to be in place. Those that were contingent on South Dakota will have to wait for the South Dakota Supreme Court to issue an opinion on remand, which is expected in August. Below are specifics of those regimes, including effective dates:

  •  Alabama (Jan. 1, 2016), $250,000 in in-state sales [No]
  •  Connecticut (July 1, 2018), 200 transactions or $250,000 in in-state sales [No]
  •  Georgia (Jan. 1, 2019), 200 transactions or $250,000 in in-state sales [Yes]
  •  Hawaii (July 1, 2018) 200 transactions or $100,000 in in-state sales [No]
  •  Illinois (Oct. 1, 2018) 200 transactions or $100,000 in in-state sales [No]
  •  Indiana (July 1, 2017) 200 transactions or $100,000 in in-state sales [Yes]
  •  Iowa (Jan. 1, 2019) 200 transactions or $100,000 in in-state sales [Yes]
  •  Kentucky (July 1, 2018) 200 transactions or $100,000 in in-state sales [Yes]
  •  Louisiana (contingent on Wayfair ruling) 200 transactions or $100,000 in in-state sales [No]
  •  Maine (Oct. 1, 2017) 200 transactions or $100,000 in in-state sales [No]
  •  Minnesota (contingent on Wayfair ruling) No Threshold Set [Yes]
  •  Mississippi (Dec. 1, 2017) $250,000 in in-state sales [No]
  •  North Dakota (contingent on Wayfair ruling) 200 transactions or $100,000 in in-state sales [Yes]
  •  Oklahoma (July 1, 2018) $10,000 in in-state sales [Yes]
  •  Pennsylvania (March 1, 2018) $10,000 in in-state sales [No]
  •  Rhode Island (Aug. 17, 2017) 200 transactions or $100,000 in in-state sales [Yes]
  •  South Dakota (contingent on state’s Supreme Court approval, following high court Wayfair decision) 200 transactions or $100,000 in in-state sales [Yes]
  •  Tennessee (Currently on hold due to litigation) $500,000 in in-state sales [No]
  •  Vermont (contingent on Wayfair ruling , July 1, 2017) 200 transactions or $100,000 in in-state sales [Yes]
  •  Washington (July 1, 2017) $10,000 in in-state sales [Yes]
  •  Wyoming (July 1, 2017) 200 transactions or $100,000 in in-state sales [Yes]
Many of these states have also enacted other online tax regimes, including:
  •  Colorado-style notice/reporting regimes that require retailers to alert customers to their tax liabilities;
  •  marketplace provider provisions that require Amazon-type sellers to collect sales tax on third-party transactions conducted on their platforms; and
  •  “cookie nexus” regulations, which require online vendors to collect state sales tax if they have property interests in or use in-state apps and “cookies.”
Practitioners tell Bloomberg Tax that many states might abandon these non-economic nexus regimes in the coming months, after the Wayfair ruling.

Guidance Issued Post-'Wayfair’

Meanwhile, many of those states and others chimed in June 27 to tell Bloomberg Tax of their post- Wayfair plans and specifically on when e-retailers and consumers can expect any guidance—and when to pay up. Those include:

  •  In Alabama: Guidance is expected between July 2-3, according to Joe W. Garrett Jr., deputy commissioner for the Alabama Department of Revenue.
  •  In Arizona: “The Arizona Department of Revenue is continuing to analyze the Supreme Court decision and will proceed with any public guidance after it has completed its review of the ruling’s implications for Arizona. No time frame on when the analysis will be completed,” DOR spokesman Ed Greenberg told Bloomberg Tax.
  •  In Louisiana: Kimberly L. Robinson, Secretary of Revenue told Bloomberg Tax that the state had a special session end on June 24.
  •  “But we were in a special session a few weeks ago, and we enacted a provision of law that mimics South Dakota’s law, and our law was contingent upon the Supreme Court finding South Dakota’s law constitutional,” Robinson said. “Technically, that was the question before the court. They somewhat decided that, but not fully, so we know that Quill is overturned and that South Dakota’s law meets part of the Commerce Clause test.”
  •  Robinson said Louisiana will be looking to the lower court’s remand as a “roadmap.”
  •  “We will make sure that we issue notice about the voluntary compliance piece to let those retailers know they can register and start complying we provide any additional guidance as to how the commission will move forward.”
  •  In Minnesota: Guidance will be published by the DOR within 30 days of the Wayfair decision.
  •  In Mississippi: The DOR is “reviewing the Wayfair ruling by the U.S. Supreme Court to determine the impact of the decision for Mississippi.”
  •  In Nevada: Bill Anderson, executive director of the state’s Department of Taxation, said officials are “actively assessing the potential impacts on taxable sales activity in Nevada, as well as any policy changes that might be necessary for implementation.”
  •  In South Carolina: Although certain observers say changes to South Carolina sales tax provisions were possible in 2019 as a result of Wayfair, they and the state Department of Revenue say that current statutes are sufficient to tax remote sellers and online retailers now.
  •  Bonnie Swingle, a spokeswoman for the state DOR told Bloomberg Tax June 28 that it is the department’s position that South Carolina sales tax statutes have always been construed to the fullest extent permitted under the United States Constitution. “Therefore, because the Supreme Court has held in Wayfair that there is no physical presence requirement under the Constitution, the current sales tax statutes apply to remote sellers and online retailers,” she said.
  •  In Rhode Island: The state issue new guidance on registration options.
  •  In Texas: Hegar said early 2019 was a targeted date for amendments to the state’s online sales tax rules.
  •  “The Comptroller’s office also expects the Texas Legislature to play an important role in addressing key issues when they return in January 2019,” a July 27 press release said. “The agency anticipates that the state and local governments will see tax collections increase, but the amount depends on the implementation and resolution of several significant issues raised by the Supreme Court’s ruling.

States Without Economic Nexus

The following states don’t have an economic nexus regime like South Dakota’s, though most practitioners tell Bloomberg Tax it won’t be long before they do after Wayfair.

  •  Arizona
  •  Arkansas, but it is a member of the SSUTA.
  •  California
  •  Colorado
  •  Florida
  •  Idaho
  •  Kansas, but it is a member of the SSUTA.
  •  Maryland
  •  Massachusetts
  •  Michigan, but it is a member of the SSUTA.
  •  Nebraska, but it is a member of the SSUTA.
  •  Nevada, but it is a member of the SSUTA.
  •  New Jersey, but it is a member of the SSUTA.
  •  North Carolina, but it is a member of the SSUTA.
  •  Ohio, but it is a member of the SSUTA.
  •  South Carolina
  •  Texas
  •  Utah, but is a member of the SSUTA.
  •  Virginia
  •  West Virginia, but is a member of the SSUTA.
  •  Wisconsin, but is a member of the SSUTA.

With assistance from Aaron Nicodemus in Boston, Karn Dhingra in Houston, and David McAfee in Los Angeles.

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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