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Remote Seller Nexus Laws Expand into California, Texas and the District of Columbia

For the states of California and Texas as well as the District of Columbia, Wayfair-related remote seller legislation has been drafted to take effect in 2019.

California
The California Department of Tax & Fee Administration has issued notice that it will impose remote seller nexus at a threshold of $100,000 of sales, or at least 200 “retail sales,” starting in April of 2019.   The CDTFA announced that effective April 1, 2019, out-of-state retailers whose sales into the state exceed $100,000, or who engage in 200 or more separate transactions into the state must collect and remit use tax.

In addition, the agency issued guidance stating that the requirement will also apply to the collection of district use tax—provided the retailer (whether in-state or out-of-state) meets the threshold of $100,000.

Upon meeting the economic nexus threshold, out-of-state retailers are required to register with the CDTFA and collect and remit the state and mandatory local use tax* on their sales into the state, presently assessed at 7.25 percent.

A bill introduced in the California Assembly on Dec. 14, 2018 proposes a $500,000 economic nexus threshold for out-of-state retailers. The provision, if passed, would directly contradict the CDTFA’s $100,000/200 transaction threshold, issued Dec. 11, 2018.

District of Columbia
The District originally approved and passed its “Internet Sales Tax Amendment Act of 2018” which seeks to establish an economic nexus sales tax standard for D.C., requiring remote sellers that, whether in the current or previous calendar year, had either $100,000 in sales or 200 or more retail transactions into the district to collect sales tax.  The changes include an effective date of January 1, 2019.

On December 31, 2018, District of Columbia Mayor signed the Internet Sales Tax Emergency Amendment Act of 2018, identical to the Internet Sales Tax Amendment Act of 2018 and which allows the District to begin enforcing the various provisions immediately. Note that the emergency act is effective for 90 days after the Mayor signs it, which she did on December 31, 2018.
The emergency act also imposes sales and use tax on digital goods and “other taxable tangible personal property electronically or digitally delivered.”

Effective April 1, 2019, the District will extend the collection requirements to marketplace facilitators. Specifically, marketplace facilitators will be required to collect and remit sales tax on all sales made on its own behalf and on sales it facilitates on behalf of marketplace sellers to customers in the District, regardless of whether the marketplace seller is required to collect sales tax.

Texas
Texas announced that it will impose a threshold of $500,000, with an anticipated enforcement starting in December 2019. Further, the introduced Texas rules include an anti-abuse provision that would appear to allow the state to group related entities for purposes of meeting the sales threshold.

The Texas Comptroller amended its regulations to create a “safe harbor” from sales tax collection requirements for remote sellers whose total Texas revenue is less than $500,000 for the preceding 12 calendar months. Texas will begin enforcing the tax collection obligation on Oct. 1, 2019.  Texas defines “total Texas revenue” as gross revenue from the sales of tangible personal property and services, and includes taxable, nontaxable, and exempt sales to establish and exceed the threshold.

Additionally, the Texas Comptroller of Public Accounts issued draft legislation proposing a single local tax rate for remote sellers. The bill intends to simplify local tax compliance for remote sellers by allowing them to apply a single rate rather than the 1,500 potential jurisdictional rates at issue for domestically based sellers. However, the single local rate would only apply in addition to, rather than in place of, the state sales tax rate.

Author: Stephen Basiaga, JD, LLM  |  sbasiaga@withum.com


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