The Top 8 Significant Sales Tax Issues of 2017

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Safe to say, there have been quite a few notable developments in the online sales tax realm and in multistate issues in general in 2017.

Here are eight instances that we thought were of particular significance, which we’ve discussed on our blog in the past year:

1. Fascinating Ramifications of Colorado’s New Online Sales Tax

What are the ramifications of online sales tax in Colorado? Colorado has been at the forefront of the internet sales tax debate since 2010, when it passed a law that required companies with more than $100,000 in sales that did not have nexus in the state to

  • alert Colorado customers that state sales or use tax is due
  • file annual reports to the state, listing all the names, purchases and shipping addresses of Colorado customers.

After making its way to the courts and several rounds of negotiations between the state and taxpayers, the law went into effect on July 1, 2017.

2. Another Move Toward Economic Nexus

How are states like Indiana pushing economic nexus limits? When businesses sell their products across state lines, they need to think about whether they have taxable presence, or nexus, in the state and if their products are taxable.

In 2017, several states began pushing the boundaries of defining the physical presence in order to generate more revenue. Welcome to the concept of “economic nexus.”

3. What’s New In Massachusetts? An Online Sales Tax Update

Have you been following the latest online sales tax directives from Massachusetts? Although Massachusetts’ Directive 17-1 was very quickly pulled back by the state, it was so distinctive that it’s worth noting in our list of biggest online sales tax news from the year.

Why? It redefined nexus, twisting established precedent to justify collecting sales tax from internet vendors. The most interesting part of this directive, however, is the detailed discussion and justification accompanying it, contorting previous precedent and state law to increase the number of online retailers responsible for charging customers for state sales tax.

4. Amnesty Program Directed at FBA Sellers

This voluntary amnesty program offered online marketplace sellers a chance to come forward. On Monday, July 31, the nexus committee of the Multistate Tax Commission (MTC) approved the MTC to participate in a multistate sales tax amnesty program for third-party sellers whose only nexus with a state is the use of fulfillment services offered by third-party marketplaces.

This voluntary disclosure program offered online marketplace sellers a chance to come forward if they hadn’t been collecting, and remitting taxes (sales/use and income/franchise tax) in states where they should have. Even though the program ended in November, the type of amnesty was unprecedented, so we felt it should be noted in our year-end review.

5. How Did Washington Expand Nexus? The Latest State Tax Legislation

Did you hear about Washington’s latest state tax legislation? Over the last few years, Washington has taken an interesting approach to its nexus and state tax law. Back in July, the state’s Department of Revenue (DOR) enacted another piece of legislation that affected economic nexus: HB 2163. This House Bill extended Washington’s economic nexus standard in retailing activity that met the bill’s defined thresholds.

6. Reminder to California Manufacturers: Sales Tax Exemption!

This useful partial exemption is available to manufacturing companies. In September we reminded businesses about this useful partial exemption available to manufacturing companies.

It allows certain manufacturers and biotech companies to exempt a portion of California sales and use tax on purchases of qualified equipment used in manufacturing and R&D (research and development). While it originally went into effect July 1, 2014, this past fall the California Governor extended it beyond its original end date of 2022, to be available until 2030.

7. New: Online Sales Tax Bill Defeated in South Dakota Supreme Court

South Dakota’s online sales tax legislation could end up before the U.S. Supreme Court. Back in 2016, South Dakota passed an economic nexus statute mandating a sales tax collection responsibility from sellers grossing over $100,000 in sales to the state’s customers, or transactions numbering more than 200 in a year – even if the seller has no physical presence or other connection with the state.

Unsurprisingly, South Dakota’s Supreme Court ruled Senate Bill 106 to be unconstitutional. However, the ruling did give the state a case they could appeal to the U.S. Supreme Court. Now we eagerly wait to see whether the high court will hear the case this year.

8. South Carolina to Amazon: Collect Sales Tax Now

How is South Carolina going after online sales tax? South Carolina recently filed a motion in court to force Amazon to collect these taxes and fees on behalf of its third-party sellers.

The state is claiming it could lose more than $500 million in sales tax if Amazon doesn’t begin collecting them now, and is asking the court to require the retailer to charge sales tax and put it into a trust or escrow-type account until the case is settled.

Final Thoughts

Would you add any online sales tax issues from the past year to this list? We know that there are others that might have been your favorite, but these seemed to attract a good amount of attention during 2017. 

We encourage you to stay tuned for continued interesting news from all the states in 2018, as they all seek to increase compliance and collection efforts! Additional information on the above sales tax developments can be found in Miles Consulting Group’s blog.

About Monika Miles

Monika Miles

Monika founded Miles Consulting Group in 2002. The firm focuses on multi-state tax consulting—helping their clients navigate state tax issues such as sales tax and income tax in interstate commerce, including e-commerce.

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