As of the turn of the year, seven more states now require out-of-state sellers to collect and remit sales tax.
States were once prohibited from taxing sales by businesses with no physical presence in the state. However, the Supreme Court of the United States overruled the physical presence restriction in its decision in South Dakota v. Wayfair, Inc. (June 21, 2018), finding it to be “unsound and incorrect.” The court determined that an out-of-state business could establish a sales tax collection obligation through “economic and virtual” contacts with a state, or economic nexus.
These states now include: Georgia, Iowa, Nebraska, Utah, West Virginia, and Washington, D.C. New sales tax collection requirements for marketplace facilitators also take effect in Alabama.
Since the landmark court decision, more than 30 states and the District of Columbia have adopted economic nexus policies requiring certain out-of-state sellers to collect and remit sales tax. Such requirements are already being enforced in many states, and they’re set to take effect in others on February 1, 2019, April 1, 2019, and October 1, 2019. More will surely follow, as several states (e.g., Arkansas, Missouri and Virginia) have economic nexus provisions slated for consideration during upcoming legislative sessions.
To date, all states with remote seller sales tax policies allow an exception for small sellers. For example, a sales tax collection obligation is triggered in Minnesota when a remote seller has 10 or more retail sales totaling more than $100,000, or at least 100 retail sales, during a period of 12 consecutive months. Yet in Alabama, a remote seller must have more than $250,000 in annual sales in that state and engage in additional activities there to trigger sales tax nexus.
In Georgia, Remote sellers must collect and remit Georgia sales tax or comply with non-collecting seller use tax reporting and customer notification requirements if, in the previous or current calendar year, they:
Have gross revenue in Georgia in excess of $250,000 from retail sales of tangible personal property to be delivered electronically or physically to a location in Georgia
Conducted 200 or more separate retail sales of tangible personal property to be delivered electronically or physically to a location in Georgia.
In Iowa, marketplace facilitators and remote sellers must collect and remit Iowa sales tax if, in the current or previous calendar year, they:
Have $100,000 or more in gross revenue from sales of taxable or exempt tangible personal property, services, or specified digital products sold into Iowa or for delivery into Iowa
Make 200 or more separate transactions into Iowa (each invoice generated from an Iowa sale is considered a separate transaction).
In Nebraska, remote sellers that are engaged in business in the state are required to collect and remit Nebraska sales tax if, they have:
More than $100,000 of sales into Nebraska annually
200 or more separate transactions for delivery into the state annually.
In Utah, remote sellers must collect and remit Utah sales tax if, in either the previous or current calendar year, they:
Receive more than $100,000 in gross revenue from the sale of tangible personal property, any product transferred electronically, or services for storage, use, or consumption in Utah; or
Have 200 or more separate transactions of tangible personal property, any product transferred electronically, or services for storage, use, or consumption in Utah.
In West Virginia, a remote seller is required to collect and remit West Virginia sales tax if, during the calendar year, it:
Had gross sales of tangible personal property and/or services for delivery in West Virginia of more than $100,000
Had at least 200 sales transactions for delivery in West Virginia.
In Washington, D.C., remote retailers must collect and remit sales or use tax in the District if, in the current or previous calendar year, they have or had:
Gross receipts of more than $100,000 from all retail sales delivered into the District
200 or more separate retail sales delivered into the District.
Gail Cole is a Senior Writer at Avalara. She’s on a mission to uncover unusual tax facts and make complex laws and legislation more digestible for accounting and business professionals — or anyone interested in learning about tax compliance.