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:
Gail Cole began researching and writing about sales tax for Avalara in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts and endeavors to make complex sales tax laws more digestible for both experts and laypeople.