- AZ House Legislature
- NetChoice Letter to Sen. Leach (AZ)
- Post-Quill Model Legilsation
- Talking Points, Marketplace Faciltator
Updates below (and in our tracking sheet) for LA, WI, VT, OH, AZ, NC, and NCSL/Telco & Cable
House amendment 1 removed Marketplace Facilitator definition. Kevin Callahan noted:
I was told that the Dept. of Revenue testified at the public hearing last week that they wanted to work through simplification before tackling marketplace facilitator requirements. Of course the parishes are skeptical about simplification since they rely on sales tax as opposed to property tax revenue but that discussion will play out over the next year.
Wisconsin SB 243 was introduced 24-May. Referred to Revenue committee for hearing on 30-May, but deferred.
Current text shows this definition, eff Oct-2019:
“Marketplace provider” means any person who facilitates a retail sale by a seller by listing or advertising for sale by the seller, in any manner, tangible personal property, or items, property, goods, or a service, and through agreements or arrangements with 3rd parties, directly or indirectly, who are collecting payment from the purchaser and transmitting that payment to the seller, regardless of whether the person receives compensation or other consideration.
Liability relief, declining over 3 years.
Prohibits class action lawsuits.
Wisconsin pays 0.5% discount, capped at $1000 per mo.
The fiscal note shows $60M annual rev from Marketplaces.
Sec 22 addresses lodging marketplaces:
a marketplace provider is liable for the tax imposed under this section on the entire sales price charged to the purchaser, including any amount charged by the marketplace provider for facilitating the sale
allows waivers for lodging marketplaces under a BRAND NAME (e.g. Hilton):
(b) A marketplace provider whose only activities are facilitating sales of services on behalf of marketplace sellers operating under a shared hotel, motel, or restaurant brand name, may submit an application to the department to request a waiver from collecting and remitting tax on sales facilitated on behalf of marketplace sellers.
Sec 28 / 29 require passenger car renters to collect tax and fees.
“A marketplace that is a remote seller but does not qualify for the small seller exception is required to register and collect Wisconsin sales or use tax on taxable sales made on behalf of third-party sellers. A marketplace that makes sales on behalf of a third-party seller is considered a retailer and is liable for tax on Wisconsin sales made by the marketplace on behalf of the third-party seller.”
In its response to public comments on the proposed rule, DoR said this about tax rules for lodging marketplaces:
Addressing municipal law on room taxes is not appropriate for a rule specific to sales and use taxes. The department is, however, in the process of updating its published guidance for lodging marketplaces. The department is taking additional steps to educate lodging marketplaces that they are required to register for a lodging marketplace license. Once a lodging marketplace license is received, the marketplace is required to collect Wisconsin sales and use taxes and local room taxes.
Defines as “Vendors” marketplace facilitators and marketplace sellers meeting threshold of 100K/200 sales; effective Jun-2019.
The def for marketplace facilitators is the very broad one, and captures mere advertising sites with these two conditions:
(ii) owning or operating the infrastructure, electronic or physical, or technology that brings purchasers and marketplace sellers together;
AND. (iii) listing products for sale;
There is relief for errors by sellers; Does not prohibit class actions against marketplaces.
Vermont pays no vendor discount.
Ohio HB 166 (the budget bill) passed the House and in Senate Finance committee as of 14-May.
The budget bill is 3,500 pages, and the marketplace language begins at 2,365 with a very broad definition of MF:
(1) Lists, communicates offer, has technology, provides the marketplace, etc. AND
(2) The marketplace facilitator, directly or indirectly, does any of the following:
(a) Collects the price of the tangible personal property or services sold to the consumer;
(b) Provides payment processing services for the sale;
(c) Charges selling fees, listing fees, referral fees, fees for inserting or making available the property on a marketplace
(d) Collects payment in connection with the sale from the consumer
How can we help to pursue a better definition?
$100K /200 sales threshold for MF
Eff Jul-2019 – try moving to 90 days after enactment.
Removes the cookie nexus language that was subject of NetChoice/ACMA lawsuit.
Ohio is an origin state, but says MF shall determine sourcing where consumer receives the goods.
MF gets “same rights and obligations as other sellers” Ohio pays 0.75% vendor discount.
MF gets liability relief and class actions are prohibited (p.2373)
Takes effect month after signing. Threshold is $100K/200 sales.
Targets retail sales of TPP and does not amend taxes on lodging or travel service marketplaces.
Does not meet the Wayfair standards and does not adopt SSUTA.
Has broad definition for Marketplace Facilitator (Washington)
Provides MF some liability protection for seller errors, with limits; prohibits class actions against MF.
While AZ has state-level auditing, it allows cities and towns to add their own privilege tax or sales tax on MFs
Does not provide compensation for marketplace tax services.
Sen. Vince Leach wrote Steve on 6-Feb asking for edits, saying “My goal is to make sure that AZ is complying with Wayfair to lessen the chances of legal challenges in the future.”
On 13-Feb, Carl met with Sen. Vince Leach to discuss problems with the bill. Leach wanted to send to a study committee as he recognizes conflicts with Wayfair. But the bill’s sponsor opposed a study committee, so Leach is now in “kill mode” in the Senate. Even with threat of litigation, Leach believes bill would pass if it gets to the floor.
NetChoice testimony said Arizona would not meet Wayfair standards; vulnerable to legal challenge.
Marty Eisenstein (Brann & Isaacson) wrote DoR Deputy Director raising concern about discrimination:
HB 2702 would unconstitutionally discriminate against interstate commerce, by requiring out-of- state businesses to pay the TPT of the location where Arizona purchasers reside. In-state businesses, however, could simply use the TPT rates and rules applying to the business location – regardless of where the customer resides.
On 19-Feb U of AZ law professor John Swain wrote the sponsor with a legal analysis:
Swain sees no legal risk regarding MFs: “consolidated tax collection on marketplace sales, and “express guidance on the tax collection obligations of marketplace facilitators.”
On 3-Apr Professor Pomp opinion focused on NetChoice commerce clause issues on treating taxpayers differently for online purchases versus storefront purchases.
On 12-Apr, our ally Sen. Vince Leach sent new Wayfair bill. We worked with Marty on a reply (attachment 3).
We added remaining marketplace improvements from our agreed list.
We re-iterated interstate commerce discrimination that Marty and Professor Pomp shared earlier.
Leach wrote us after the 15-Apr stakeholder meeting:
At the table were two area PHX Chambers, NFIB, ATRA, and Amazon. General agreement that 2.0 was a better version but still not ready for prime time. I have given the sponsor, Mr. Toma, copies of our correspondence, past and current so those issues would be on the table. One agreement from the group was to give the AZ AG an opportunity to review the bill before it proceeded to the legislative process. To that end, I have sent all of your comments to the AG for review in anticipation of a review being requested. Interesting to note that the AG office said that they saw some potential problems with the original bill, but would not elaborate.
On 15-May Sen. Leach sent what he says is the “final” Wayfair bill (attachment 4).
p.1 and p.8. No city/town can demand a business license/fee from out-of-state seller solely because they meet the tax collection threshold.
p.3 Assume most of you are happy they fixed their marketplace facilitator definition, as we requested:
(a) MEANS A PERSON THAT FACILITATES A RETAIL SALE BY A MARKETPLACE SELLER BY LISTING OR ADVERTISING FOR SALE BY THE MARKETPLACE SELLER IN A MARKETPLACE TANGIBLE PERSONAL PROPERTY AND, EITHER DIRECTLY OR INDIRECTLY, THROUGH AGREEMENTS OR ARRANGEMENTS WITH THIRD PARTIES COLLECTING PAYMENT FROM THE PURCHASER AND TRANSMITTING THAT PAYMENT TO THE MARKETPLACE SELLER FOR COMPENSATION, REGARDLESS OF WHETHER THE MARKETPLACE FACILITATOR RECEIVES COMPENSATION FOR THE MARKETPLACE FACILITATOR’S SERVICES.
(b) DOES NOT INCLUDE A PAYMENT PROCESSOR BUSINESS THAT IS APPOINTED TO HANDLE PAYMENT TRANSACTIONS FROM VARIOUS CHANNELS, SUCH AS CREDIT CARDS AND DEBIT CARDS, AND WHOSE SOLE ACTIVITY WITH RESPECT TO MARKETPLACE SALES IS TO HANDLE TRANSACTIONS BETWEEN TWO PARTIES.
p.12-13. MF forgiven for uncollected tax due to error/omission of seller, but the relief declines to zero by 2021.
p.13. DoR may waive penalties and interest if MF seeks relief.
- 14. Remote sellers get larger threshold in 2019 ($200K) and 2020 ($150K), then $100K. MF’s start at $100K
p.39 city/town may exempt artworks that are “sold by the original artist”. Does not require the artist to be an Arizonan.
On 15-May Christie Comanita of SSTP wrote to Leach:
From a Wayfair perspective, the allowance of a different local base, particularly the retail base, from the state base is concerning. This version of the bill goes even further, allowing greater differences under the retail classification than the prior version. It was my understanding that the League, and I assume the cities, recognized the critical need to have the retail classification, at a minimum be conformed to the state base. The changes in this version indicate otherwise.
a follow-up from 17-May call was to reply to Sen. Leach regarding the “nearly final” version of their Wayfair bill.
On 20-May we sent attachment 5 to Sen. Leach, with this cover note:
We acknowledge this “nearly final” version is a significant improvement over HB 2702, and has incremental improvements over Version 2 that you shared in April.
However, our analysis is that the latest version still fails to provide adequate simplifications and protections laid out in the US Supreme Court decision South Dakota v Wayfair. As we did in our April 14 letter, we go into some detail in the attached letter to explain unconstitutional discrimination against remote sellers and marketplaces.
- 12 has a unique definition ofMarketplace facilitator – A person that, directly or indirectly and whether through one or more affiliates, does both of the following:
- Lists or otherwise makes available for sale a marketplace seller’s items through a marketplace owned or operated by the MF.
b. Does any of the following:
- Collects the sales price or purchase price of a marketplace seller’s items or otherwise processes payment.
- Makespayment processing services available to purchasers for the sale of a marketplace seller’s items.
remote sales thresholds:
sell $10K “during the preceding four quarterly periods” via referrals from NC residents.
sell $100K or 200 sales in previous or current calendar year (incl thru marketplaces)
A marketplace seller shall treat a sale made through a marketplace facilitator as a wholesale sale
There is relief for errors by sellers;
Prohibits class actions against marketplaces
“Nothing in this section shall be construed to interfere with the ability of a marketplace facilitator and a marketplace seller to enter into an agreement with each other regarding the fulfillment of the requirements of this Article, except that an agreement may not require a marketplace seller to collect and remit tax on marketplace facilitated sales. (p.14)
Limitation. – This section does not apply to an accommodation facilitator, … whose collection and remittance requirements are set out in G.S. 105-164.4F.”
Accommodation. – A hotel room, a motel room, a residence, a cottage, or a similar lodging facility for occupancy by an individual.
Accommodation facilitator. – A person that contracts, either directly or indirectly, with a provider of an accommodation to do, either directly or indirectly, one or more of the activities listed in this subdivision. The term includes a real estate broker as defined in G.S. 93A-2. The activities are:
(a) Market the accommodation and accept payment or collect credit card or other payment information for the rental of the accommodation.
(b) List the accommodation for rental on a forum, platform, or other application for a fee or other consideration.
The sales price of the rental of an accommodation made by a an accommodation facilitator includes any charges or fees, by whatever name called, charged by the accommodation facilitator to the purchaser of the accommodation that are necessary to complete the rental. (p.15)
Accommodation Facilitator is the retailer if it collects payment at time of reservation (p. 14)
Threshold of 15 rental days per year DOES NOT APPLY if rented thru an Accommodation Facilitator as retailer
NCSL’s SALT Task Force met in DC May 10-11.
Discussion of “Marketplace Facilitator Legislation” is detailed in our report (attachment 2)
Attachment 3 is Marketplace Facilitator principles from ATT, CenturyLink Charter, Comcast, Cox, Verizon
Prefers a narrow MF def: operating marketplace AND collecting payments from customer. “Advertising online should not be enough”
Tax only TPP and not services (telcos are MF for lots of services)
MFs should get Vendor comp
If MF and seller have agreement, state should audit only the seller
Prohibit class action lawsuits for over-collection
On 17-May we agreed we can support most of the Cable/Telco principles, and should work with them, RILA, and then to NCSL, which will influence SSTP and MTC.
Deb Bierbaum (ATT) sent Steve her principles (attachment 3).
Let’s agree on changes we should pursue. Here are 3 suggestions:
- State level standards and administration of local taxes.
The telco/cable document doesn’t address the 3rd Wayfair condition: “a single, state level tax administration, uniform definitions of products and services …”
Suggested additional key point for model legislation:
The state should administer all local sales tax jurisdictions within the state using uniform definitions, and provide a single return and single audit.
- add liability relief for errors and omissions by sellers. (3-5 years).
One of their Key Principles is “Protections, such as liability relief for certain errors in collection, should exist for both facilitators and sellers who take responsibility for collection and remittance.”
But their corresponding key point for model legislation doesn’t cover that principle:
Sellers should have clear guidelines as to what information the Marketplace Facilitator needs to remit the tax at the time of the transaction. This includes classification of the product, situs, and exemption status or any relevant customer information. If there is any missing information, the Marketplace Facilitator should notify the seller and obtain the missing information prior to completing the transaction.
Is it realistic for MF to delay a real-time transaction in order to obtain that information from the seller?
And what if the sellers’ information proves to be incorrect?
Let’s suggest this edit:
Sellers should have clear guidelines as to what information the Marketplace Facilitator needs to remit the tax at the time of the transaction. This includes classification of the product, situs, and exemption status or any relevant customer information. If the seller fails to provide required information, or provides incorrect information, the Marketplace Facilitator should not be liable for uncollected taxes and penalties on affected transactions.
- vendor compensation
One of their legislation points is “Vendor’s Compensation should apply to Marketplace Facilitators under the state law for the added significant costs and liability for collecting tax on behalf of others. “
But we also want non-streamlined states to also provide adequate compensation to MFs who collect tax on behalf of marketplace sellers, per the 3rd Wayfair condition, “provides sellers access to sales tax administration software paid for by the states”
Vendor’s Compensation should apply to Marketplace Facilitators under the state law for the added significant costs and liability for collecting tax on behalf of others. States that are not members of SSTP should provide comparable compensation for Marketplace Facilitators and other certified service providers. Any limits on vendor compensation should be aggregated for all marketplace sellers served by the Marketplace Facilitator.
updates below were circulated for our previous calls:
Massachusetts marketplace bills are moving.
for compensation facilitates sales by such vendor through a physical or electronic marketplace operated by the person, and engages:
(a) directly or indirectly, through one or more related persons in any of the following:
(i) transmitting or otherwise communicating the offer or acceptance between a buyer and vendor;
(ii) owning or operating the infrastructure, electronic or physical, or technology that brings buyers and vendors together;
(iii) providing a virtual currency that buyers are allowed or required to use to purchase products from the vendor; or
(iv) software development or research and development activities related to any of the activities described in (b), if such activities are directly related to a physical or electronic marketplace operated by the person or a related person;
and (b) in any of the following activities with respect to the vendor’s products:
(i) payment processing services;
(ii) fulfillment or storage services;
(iii) listing products for sale; …
(vi) order taking;
(vii) advertising or promotion; or
(viii) providing customer service or accepting or assisting with returns or exchanges.
Reduces the MA threshold from $500K to $100K
Prohibits class action for MF overcollection
Has this linkage to Mass “cookie nexus” law, but it’s not limiting
“The sales and use tax collection responsibility of a marketplace facilitator applies but shall not be limited to sales facilitated through a computer software application, commonly referred to as in-app purchases, or through another specified digital product.”
Has interesting audit protections for MF:
(e) Nothing in this section shall prohibit the department from auditing marketplace facilitators or marketplace sellers, except the department is prohibited from assessing:
(i) marketplace facilitators, to the extent that the marketplace seller collected and remitted sales tax; and
(ii) marketplace sellers, to the extent that the marketplace facilitator remitted sales tax and was audited for such sales
(A) facilitates retail sales of $250K during the prior 12-month period by marketplace sellers by providing a forum that lists or advertises tangible personal property subject to tax or taxable services, including digital goods, for sale by such marketplace sellers,
(B) directly or indirectly through agreements or arrangements with third parties, collects receipts from the customer and remits payments to the marketplace sellers, and
(C) receives compensation or other consideration for such services.
Prohibits class action for MF overcollection
Mass also has the budget bill as of 25-Apr, HB 3801 (300 pages).
Commissioner sets the threshold, at $100K or higher.
p.268 has the broad def of MF that matches S1762 above,
also, a MF ” shall not include a person who merely provides payment processing services. “
relief for errors/omissions by sellers.
The Streamlined Sales Tax Project (SSTP) discussed marketplace facilitator legislation at their May 6 meeting in Providence.
NetChoice is a BAC board member and attended the May meeting.
See attachment 6 for our detailed report from the May meeting.
Certified Solution Providers are lobbying non-SST states for compensation. Marketplaces should be in these conversations.
State reps made these statements, incl this sheet prepared by SSTGB staff, which shows 22 states with MF obligations on the books.
IN marketplace bill was not enacted.
MO might put SSUTA back into its bill [after lobbying from CSPs].
KY is hearing from online travel sites that some of their marketplace hotels want to handle sales and lodging taxes. I spoke to Richard Dobson and he claims his hands are tied because the law doesn’t allow those kind of arrangements, either by deference or rulemaking.
MI now has MF provision in HB 4540 and 4541.
NE reminded that its MF obligations took effect 1-Apr-2019.
NV has MF tax in AB 445
OH House budget bill was amended last week to add MF with broad definition, while excluding online lodging marketplaces.
OK has new bill (HB2352 and SB 513) to remove Reporting option and set threshold at $100K.
SD said they are surprised by those registering as MFs. David Campbell (FedTax) thanked SD for Wayfair.
TN DoR may now enforce its Rule 129, with permission from legislature.
WA mentioned SB 5581 to clean-up its marketplace law.
WI said MF tax in the Governor’s Budget Bill.
3-May fiscal note predicts $243M in 2020.
Eff Oct-2019, adds a category of “Seller” called “Marketplace Provider” – “operates a marketplace and processes sales or payments”
MP is not liable for errors or omissions by sellers.
Prohibits class actions for over-collection by MPs.
No MP threshold when bill takes effect Oct-2019, so all MPs must collect.
Comptroller gets rulemaking powers, including small MP threshold (by rule).
By Dec-2020, the Comptroller to do a study of various thresholds ( $50K – $500K).
While TX is an origin sourcing state, this bill sources remote sales to the purchaser’s destination (Sec 4)
Note that Texas imposes its sales tax on many services too.
Texas offers retailer comp 0.5% plus Early Pay discount (1.25%) and “marketplace provider has the rights and duties of a seller”
It defines MF as anyone:
(a) listing or advertising … the products of another person in any marketplace where sales at retail occur; and
(b) collecting or processing payments from the purchaser, either directly or indirectly through an agreement or arrangement with a third party.
Dept of Tax & Finance published this FAQ page on 26-Mar.
Marketplace obligations start on p.13 (Part G), effective for sales after 1-Jun-2019
Threshold is $300K and 100 sales over prev 4 “sales tax quarters”
A marketplace provider is one who … provides forum or means by which sales take place, or offers are accepted
and collects receipts from customer or contracts with a 3rd party to collect.
This does “not include rental of a passenger car”.
There is some liability relief for marketplaces if the seller gave incorrect information. (p.15)
Do not see a prohibition on class action lawsuits against marketplaces for over-collection of tax.
NY is not a SST state, so there is no compensation for collection. MF getz retailer comp: 5% of tax, but limited to $200 per quarter.
Marty Eisenstein provided this update regarding “deemed sellers” in NY:
In the NY Advisory Opinion, TSB-A-19(1)S, March 7, 2019 (attachment 4) the NY Commissioner of Taxation and Finance said that a taxpayer that operates an online marketplace may be treated as a co-vendor with regard to all taxable sales it facilitates on its marketplace on behalf of independent software vendors (ISVs) if the taxpayer has sufficient nexus with New York; and the ISVs (marketplace sellers) themselves qualify as vendors.
In 26-Feb article, Cuomo said $280 million in sales tax owed under state law but not collected from internet marketplace purchases.
Also, on 15-Jan the NY Dept of taxation and finance (DTF) issued new post-Wayfair guidance .
They say Wayfair ruling means that “certain existing provisions in the New York State Tax Law that define a sales tax vendor immediately became effective.” DTF recites a 1989 provision in law:
“[a] business that had no physical presence in New York but has both made more than $300,000 in sales of tangible personal property delivered in the state and conducted more than 100 sales of tangible personal property delivered in the state in the immediately preceding four sales quarters is required to register as a sales tax vendor, and collect and timely remit the applicable state and local sales tax.”
DTF goes on to state that “[i]f you are a business that meets this threshold but has not yet registered as a vendor, you should do so now.” (emphasis added) DTF say they intend to enforce with immediate effect.
That section also gives the commissioner authority “for the efficient administration of this article”.
Hotel and occupancy taxes are covered in that same section, at (c).
Per request of members on 12-Apr, NetChoice asked Brann & Isaacson to file a petition for advisory opinion, regarding retroactivity intentions now that law established Jun-2019 effective date (see attachment 2).
NY refused to answer NetChoice petition, saying it would respond only to a party subject to tax liability in NY.
Kelly compared SB 22 to former Gov. Brownback’s 2012 tax cuts, which led to years of turmoil. “I refuse to endorse another round of fiscally reckless policies similar to those that left us in a mess my team is working so hard to clean up,” she said. “The days of unbalanced budgets and mismanagement are over.”
On 1-May the Senate failed to override the veto.
SB 22 is effective Oct-2019 with threshold of $100K.
It has the very broad definition of MF.
And it has the carve-out that protects you only if you exclusively do advertising:
A “marketplace facilitator” does not include a platform or forum that exclusively provides internet advertising services, including listing products for sale, so long as the internet advertising service platform or forum does not also engage directly or indirectly through one or more affiliated persons in the activities described in subsection (e).
I wonder how that helps marketplaces, since DoR could say you meet this in first set:
(B) owning or operating the infrastructure, electronic or physical, or technology that brings buyers and marketplace sellers together;
And this one in second set: (C) listing products for sale;
And “A person is not a “marketplace facilitator” with respect to the sale or charges for rooms, lodgings or accommodations provided by a hotel, motel, inn or other place that provides the rooms, lodgings or accommodations for occupancy.”
Crutchfield lawsuit vs Massachusetts:
Back in 2017, NetChoice & ACMA supported a lawsuit by retailer Crutchfield against Massachusetts DoR, based on a Virginia Law that lets a Virginia business sue –in VirginiaCourt–for declaratory judgement against a state asserting a sales tax obligation that violates the Commerce Clause. (NetChoice helped Delegate Tim Hugo pass that law back in 2004, and helped enact it in Texas and Iowa). This Virginia Law looks broadly at any ”undue burden on interstate commerce within the meaning of Article I, Section 8.” So it’s more than just Quill’s physical presence standard that was set aside in Wayfair.
On 14-Nov the MA Assistant AG told reporters he believes the state will prevail in our Crutchfield suit, and that the regulation is not retroactive. MA takes the position, in formal court filings, that Wayfair says no “physical presence” is required on the part of a remote seller to establish nexus with a state for sales tax collection purposes, and should be applied retroactively.
On 28-Sep, Massachusetts DOR filed a motion in the Crutchfield lawsuit, asserting retroactive application of Wayfair in its tax assessment on remote sellers using browser cookies — going back to Oct-2017. That’s nine months before to the Supreme Court’s Wayfair decision, defying the court’s dicta that retroactive enforcement of state sales tax obligations against remote sellers could violate the Commerce Clause.
“Wayfair represented a sea-change in constitutional law that (were the merits ever to be reached here) immediately mooted Crutchfield’s case as pleaded. And because constitutional decisions in state tax cases apply to past as well as future tax periods, Harper v. Virginia Department of Taxation, 509 U. S. 86 (1993), Wayfair applies to alltax periods at issue not just those since Wayfair was decided.” [MA Commissioner Opposition to Crutchfield Motion To Compel, 28-Sep-2018]
There is nothing ambiguous in this statement. The Massachusetts DOR is attempting to defend its challenged nexus rule based on the assertion that Wayfair should be applied retroactively, and that issue will be squarely before the courts.
On 29-Mar, we filed Crutchfield’s Opposition to the Commissioner’s Motion to Dismiss for Lack of Personal Jurisdiction in Albemarle County Circuit Court. Attachments 5 and 6, arguing that the Court has jurisdiction over the Commissioner, an out-of-state tax official.
On 17-Apr the Mass Commissioner replied in support of his motion to dismiss. NetChoice gave this reply to Boston reporters:
“We continue to believe that Virginia courts have jurisdiction over the Commissioner’s aggressive imposition of Massachusetts taxes on Virginia businesses.
The Virginia General Assembly was clear — it wanted to enable Virginia businesses to challenge such actions in Virginia courts “
On 13-May the US Supreme Court reversed the existing precedent and ruled that a state cannot be sued in the courts of another state on the ground of the Eleventh Amendment. While our case is not a suit against the Commonwealth of Massachusetts in Virginia courts, a court might find so, because our suit was against the individual representatives of the MA Department of Revenue in their official capacity.
See Tax Foundation on 25-Apr, “Colorado Inches Forward on “Wayfair Checklist,” but Complexity and Legal Questions Remain”
Created econ nexus for sales after 1-Jun-2019. $100K threshold.
Has RILA’s narrow definition of Marketplace Facilitator:
Engages directly or indirectly in communicating the offer or acceptance between purchaser and seller; AND
Either directly or indirectly through agreements or arrangements with third parties, collects the payment from the purchaser and transmits payment to seller.
Excludes person that “exclusively provides advertising services or lists products for sale”
MF is not liable for errors or omissions by sellers.
Does not prohibit class actions for over-collection by MF.
Allows MF to retain the vendor fee on sales, of 3.33% of tax collected.
Marty: The 3.33% vendor comp is comparable to SSUTA states. CO is better than most non-SSUTA states and t but not quite as good as an SSUTA state because of the long complex return that must be filed at the state to reflect the more than 150 state-administered localities (cities, counties and districts).
Codifies destination sourcing for remote sellers, while allowing in-state small sellers to use origin sourcing UNTIL the state provides an online system. Marty Eisenstein analyzed that for potential discrimination:
Likely that there is no discrimination against interstate commerce. For purposes of determining if there is discrimination against interstate commerce one must compare out-of-state companies of the same category or class as their in-state counterparts. Out-of-state and in-state companies with sales greater than $100,000 are equally subject to the destination sourcing rules, while out-of-state small sellers have lower CO taxes than their domestic counterparts.
As to whether HB 19-1240 would apply to the 70 home rule jurisdictions, it would appear that they do not. Home rule cities are authorized to impose their own sales / use taxes. The statutory provisions applicable to the imposition of city taxes may not be construed to apply to home rule cities except as these provisions specifically refer to “home rule” cities. There is nothing in the definition of retailers required to collect the tax that indicates that the law would apply to home rule jurisdictions.
Earlier, Colorado DoR had delayed its implementation date from 31-Mar-2019 to 31-May-2019. See this page and below:
There is a grace period through May 31, 2019, to comply with these changes to ensure retailers have sufficient time to make the required systems changes. Businesses will be granted a waiver from compliance with the destination-sourcing changes automatically until then.
However, a retailer that does not collect sales tax during this grace period must still comply with Colorado’s reporting statute: C.R.S. § 39-21-112(3.5). That statute requires non-collecting retailers to provide certain notices to individual Colorado customers and the Department regarding purchases where the retailer did not collect the tax. The reporting requirements for retailers that do not collect tax during the grace period will be strictly enforced. Non-collecting retailers seeking additional information about these reporting requirements should review the statute and Rule 39-21-112(3.5) in 1 CCR 201-1, which is available here.
Alabama has HB 418, to add average of local tax rates on top of the flat 8% rate.
As described in the 17-Apr fiscal note:
provides a one-time local rate adjustment not to exceed one percent above the 8% SSUT rate. The local rate adjustment is the difference between the combined state, average municipal and average county rates in effect as of January 1, 2019 and the 8% SSUT rate and shall be effective on sales made on or after October 1, 2020.
A local rate adjustment of one percent would increase SSUT collections to counties and municipalities by $19.7 million
For jurisdictions with actual rates below the statewide avg, this adjustment could force remote sellers to pay higher sales tax than in-state sellers – for the same item being sold to the same customer. Would this state law amount to Discrimination, per Commerce Clause? Marty believes no, since the locality may but is not required to impose the local tax.
Definition for marketplace facilitators is the very broad one, and captures mere advertising sites with these two conditions:
(ii) owning or operating infrastructure … or technology that brings purchasers and marketplace sellers together; AND
(iii) listing products for sale;
In Massachusetts litigation:
On 21-Dec-2018 a few e-commerce retailers sued Massachusetts DoR over its retroactive imposition of taxes on sales prior to the Wayfair ruling (attachment 3). The case was handled by Brann & Isaacson. Arguments incl: undue burden; discrimination against interstate commerce; double-taxation; and violation of the Internet Tax Freedom Act.
On 22-Feb, DoR filed memorandum asserting that Wayfair economic presence standard is retroactive, and applicable to pre-Wayfair tax periods. Key sentence:
The retroactive application of Wayfair, however, is in fact required by longstanding Supreme Court jurisprudence, and is not open to question in this Court.It is indeed well-settled that decisions of the Supreme Court interpreting federal law must be given full retroactive effect in all pending or future cases, including those that arise from tax periods pre-dating the decision
RILA (big-box retailers) have a new model state bill going after marketplaces (attachment 1):
It has a somewhat narrow MF definition, since it requires payment processing:
“1. Contracts with sellers to facilitate for consideration, regardless of whether deducted as fees from the transaction, the sale of the marketplace seller’s products through a physical or electronic marketplace operated by the person; AND
- Engages directly or indirectly in communicating the offer and acceptance between purchaser and seller; AND
- Either directly or indirectly through agreements or arrangements with third parties, collects the payment from the purchaser and transmits payment to seller.
RILA adds this useless carveout, which does not release anyone who would have been captured:
- A “marketplace facilitator” does not include a platform or forum that exclusively provides internet advertising services, including listing products for sale, so long as the internet advertising service platform or forum does not also engage directly or indirectly through one or more affiliated persons in the activities described in A.1. through A.3. of this section.
RILA added an exclusion for platforms like Hilton.com, which indicates they are working with big hotel chains:
- [OPTIONAL—If sales tax in state applies to hotel/lodging, consider adding following language to exclude from definition of “marketplace facilitator”: “A person is not a marketplace facilitator with respect to the sale or charges for rooms, lodgings or accommodations if the rooms, lodgings or accommodations are provided by a hotel, motel, inn, or other place that is a registered seller and the [registered seller] provides the rooms, lodgings or accommodations for occupancyunder a brand belonging to such person.]
Threshold is $100k or 200 transactions. Prohibits retroactivity.
1C. DoR has discretion to grant waivers to allow sellers to collect, if:
- A marketplace facilitator demonstrates, to the satisfaction of [the Department] that substantially all of its marketplace sellers already are [registered sellers] under [cite code section]; or,
- A marketplace seller has sufficient nexus to require registration under [cite code section] and [the Department] determines that collection of the tax by the marketplace seller with regard to transactions facilitated by the marketplace facilitator would serve the purpose of [cite code section].”
2C. Allows arrangements: “Nothing in this Section shall interfere with the ability of a marketplace facilitator and a marketplace seller to enter into agreements regarding fulfillment of the requirements of this [Chapter].”
I/H. MPs get class action protection and limited liability for errors or omissions by sellers.
SB 322 passed Senate on 19-Feb by 40-0.
House approved it 94-0 on 11-Apr, as amended (text), incl striking “through the internet” from facilitator definition.
Conference committee appointed 16-Apr.
Effective Jul-1019; Threshold is $100K or 200 sales.
MF is “a person who owns, operates, or otherwise controls a marketplace; and facilitates a retail transaction,” which is ANY of the following on behalf of a seller:
(1) Collects the sales price or purchase price of the seller’s products.
(2) Provides access to payment processing services, either directly or indirectly.
(3) Charges, collects, or otherwise receives selling fees, referral fees, closing fees, fees for making available products as a marketplace facilitator, or other consideration for active facilitation.
(b) The term does not include a payment processor business: (1) that is appointed by a merchant to handle payment transactions from various channels, including credit cards and debit cards; and (2) whose sole activity with respect to marketplace sales is to handle payment transactions between two parties.
Prohibits class action lawsuits and relieves MF of liability for seller errors, with declining annual limits.
Sec 53 applies to lodging in owner’s personal residence. (p. 6)
In Congress, Reps Sensenbrenner, Duncan, Lofgren, and Kuster re-introduced their Online Sales Simplicity and Small Business Relief Act. (HR 1933)
- Ban retroactive tax collection requirements, by barring states from imposing sales tax collection duties on remote sellers for any sale that occurred prior to January 1, 2019
- Exempt small biz under $10 million in annual sales from collection duties — until states produce a compact, approved by Congress, to simplify collection to the point where no small business exemption is necessary. The $10M level is too low to exempt marketplaces. But this is designed as an incentivefor states to adopt SSUTA, which benefits sellers of all sizes, both for interstate and intrastate sales.
In early 2018, we helped Chairman Goodlatte with a clever definition of “Sales Tax Collection Duty” as any obligation on “a person other than the actual seller” to pay tax or report information. That was designed to prevent tax or reporting duties on marketplaces.
But after Wayfair, Goodlatte dialed-back the bill to just provide a ramp-up time for sellers, and to use the small biz exception as a carrot to get states to join SSUTA. There’s possibly an argument that marketplace sellers are each small, and that a marketplace isn’t the “actual seller” for their transactions. But the language would have to be tightened to get there.
Bottom line: Judiciary chair Nadler will not move legislation unless states are seen as unreasonable, or he sees new lawsuits.
Idaho HB259 was signed by Gov this week. Effective Jun-2019 with threshold of 100K/200 sales
The def for marketplace facilitators is the very broad one, and captures mere advertising sites with these two conditions:
(ii) owning or operating the infrastructure, electronic or physical, or technology that brings purchasers and marketplace sellers together; AND. (iii) listing products for sale;
Prohibits remote sellers and Marketplace facilitators from collecting local sales taxes; they should collect only the state sales tax:
(h) after June 1, 2019, any retailer without a physical presence in Idaho that has, in the previous calendar year or the current calendar year, cumulative gross receipts from sales delivered into Idaho in excess of $100,000. Provided, however, a retailer described under this paragraph (h) shall not collect or remit any local sales tax or any other tax or assessment that is not imposed by this chapter.
63-3620E. COLLECTION OF TAX BY MARKETPLACE FACILITATORS. (1) A marketplace facilitator shall register with the state tax commission and collect,
report, and pay state sales and use taxes on any retail sale facilitated by the marketplace facilitator. A marketplace facilitator shall not collect, report, or pay any local sales tax or any other tax or assessment that is not imposed by this chapter.
A remote MF has 45 days grace period to comply after making first sale after Jun-2019.
There is relief for errors by sellers;
Prohibits class actions against marketplaces
MF provision takes effect Oct-2019 with the broad definition (6401). Does not require payment processing.
$500K threshold. No compensation for service providers.
MF gets liability relief for errors by sellers, thru 2022. Applies to district level tax obligations, too.
No protection from class actions against MFs (6048)
On 11-Mar the Assembly amended the bill, calling it an “urgency statute” that takes effect immediately. Passed 69-0 on 14-Mar.
NetChoice testimony asked for:
Restore class action lawsuit protection – on any sales where the customer received a refund of tax overpayment.
Narrow MF definition, and ask to define MF transactions instead of designating a MF for all its transactions.
Reasonable time to implement, and give discretion to Rev Commissioner
We sent to Governor’s staff and to Maduros and his staff at CDTFA on 8-Mar.
Struck (G) Advertising or Promotion from second set of conditions.
Added 6041.1. “websites that advertise tangible personal property for sale, that do not transmit or otherwise communicate the offer and acceptance for the sale of tangible personal property between the seller and purchaser, and do not process payments directly or indirectly through third parties for the tangible personal property sold, are not facilitating a sale under this chapter.”
Added 6041.5. “a person that is a delivery network company is not a marketplace facilitator for purposes of this chapter.
“Delivery network company” means a business entity that maintains an internet website or mobile application used to facilitate delivery services for the sale of local products.”
Broad definition of Marketplace Facilitator.
Liability relief for seller errors.
Class action protections.
Does not prevent MF and seller from agreeing on tax obligations.
Note that Maine issued guidance that asserts sales tax is retroactive to 1-Jul-2018:
“This statute will be enforced for sales occurring on or after July 1, 2018, the first monthly filing period after the date of the Wayfair decision. MRS urges every seller that is subject to section 1951-B and has not already done so to immediately register as a Maine retailer and begin collecting and remitting Maine sales and use tax. Any remote seller that, on or after July 1, 2018, met or meets one, or both, of the nexus thresholds established by section 1951-B, but did not register as a retailer, is subject to assessment for any uncollected or unremitted Maine sales and use taxes.”
Rhode Island S251 SUB A was signed by Gov on 29-Mar and takes effect 90 days after Gov signature – Jul-2019
here’s a report on the 26-Feb hearing:
DoR tax director said bill follows Wayfair. Said a separate budget bill will impose sales tax on digital downloads, too.
Chair/Sponsor Conley noted the Wayfair dicta and said RI met the standards.
Steve was only witness to testify, and took 15 minutes of Q&A. Summary:
As part of Streamlined, Ri does OK on 3rd Wayfair standard —but only from the perspective of remote sellers.
Wayfair and SD law said nothing about Undue burdens on non-sellers, like so-called MFs.
Many states are attempting to capture Marketplaces, and in very different ways.
We looked at them all and developed a dozen sensible principles for imposing tax burdens on MFs — with less legal risk.
S 251 misses a key principle in how it defines MF.
For many MF transactions, the MF does not even see the sale happen — just a link to the seller’s website or an ad.
How does S 251 capture an advertiser who doesn’t handle the sale?
The MF definition in S251 has two lists of activities, where just one activity from each list is enough to be captured as a marketplace facilitator. But some activities are essentially duplicated in both lists.
“Software development” is on one list while “advertising or promotion” and “listing products for sale” is on the other.
Nearly all online marketplaces engage in software development in order to list and promote items offered by sellers that match-up with searches requested by users.
Gave another example of double-up definition: “communicating an offer” and “taking orders”
So, MFs performing just a single activity would find themselves on both lists in S 251, and would therefore be required to collect sales tax – even on transactions where the marketplace does not actually manage the purchase transaction.
Got several questions about referrals on Google Shopping and eBay auctions.
The concept that resonated with Senators is, “how can a MF be liable for tax if they can’t see the payment happen?”
Steve said they should not characterize MFs one way or the other, since some transactions are completed outside the MF. The state should look at those MF Transactions where tax can possibly be collected.
Tax Director Nina Savage came back up and acknowledged the problem I cited.
Said they looked at MF definitions from WA, PA, MTC, and purposely used a broad definition to capture everybody. Then DoR can give letter rulings for any business models that don’t see the transaction.
Chair asked if that would reduce their revenue estimate. She said no.
DoR Rev analyst (Paul) took questions. Said rev estimate was developed using GAO study plus adjustments. $11 million from Oct-2019 thru Jun-2020. $14M in FY21.
Missouri has new substitute bill (SB 46), with these changes:
Effective Jan-2021. Does not require Missouri to join Streamlined or implement SST simplifications.
On p.299 it replaces the broad definition of marketplace facilitators with a narrower one:
1) “Marketplace facilitator”, a person that:
(a) Facilitates a retail sale by a marketplace seller by listing or advertising for sale by the marketplace seller in any forum, tangible personal property or services that are subject to tax under this chapter; and
(b) Either directly or indirectly through agreements or arrangements with third parties collecting payment from the purchaser and transmitting such payment to the marketplace seller regardless of whether the marketplace facilitator receives compensation or other consideration in exchange for its services.
Is on Senate calendar for perfection on 23-Apr
As “emergency” legislation, it takes effect Jul-2019
Marketplace provider must collect on all sales. Threshold is $100K / 200 sales.
Marketplace provider is a broad definition, covering one who meets both 1 and 2:
- a. Lists, makes available, or advertises tangible personal property, digital property, or services for sale by a marketplace retailer in a marketplace owned, operated, or controlled by the person;
- Facilitates the sale of a marketplace retailer’s product by communicating an offer or acceptance between a marketplace retailer and a purchaser
- Owns, rents, licenses, makes available, or operates any electronic or physical infrastructure or any property, process, method, copyright, trademark, or patent that connects marketplace retailers to purchasers
d. Provides a marketplace for making retail sales, or otherwise facilitates retail sales, regardless of ownership or control of property or services.
e. Provides software development or research and development activities related to any activity described in this subparagraph, if the software development or research and development activities are directly related to the physical or electronic marketplace provided by a marketplace provider;
f. Provides or offers fulfillment or storage services for a marketplace retailer;
g. Sets prices for a marketplace retailer’s sale of tangible personal property, digital property, or services;
h. Provides or offers customer service to a marketplace retailer or a marketplace retailer’s customers, or accepts or assists with taking orders, returns, or exchanges of property or services sold by a marketplace retailer; or
i. Brands or otherwise identifies sales as those of the marketplace provider;and
- The person directly or indirectly:
- Collects the sales price or purchase price of a retail sale of property or services;
- Provides payment processing services for a retail sale of property or services;
c. Charges, collects, or otherwise receives selling fees, listing fees, referral fees, closing fees, fees for inserting or making available property or services on a marketplace, or receives other consideration from the facilitation of a retail sale, regardless of ownership or control
- Through terms and conditions, agreements, or arrangements with a third party, collects payment in connection with a retail sale from a purchaser and transmits that payment to the marketplace retailer, regardless of whether the person collecting and transmitting the payment receives compensation or other consideration in exchange for the service; or
e. Provides a virtual currency that purchasers are allowed or required to use to purchase tangible personal property, digital property, or services.
“Marketplace provider” includes but is not limited to a person that satisfies the requirements of this subsection through the ownership, operation, or control of a digital distribution service, digital distribution platform, online portal, or application store
marketplace provider shall be subject to audit on all sales made on its own behalf and on all sales facilitated by the marketplace provider.
The marketplace retailer shall be relieved of all liability for the collection and remittance of the sales or use tax on sales facilitated by the marketplace provider.
No class action may be brought against a marketplace provider on behalf of purchasers arising from or in any way related to an overpayment of tax collected by the marketplace provider.
I do not see liability relief for errors or omissions by the marketplace seller.
After the NetChoice lawsuit in 2017, the TN economic presence rule was suspended by court order and by law requiring the rule be reviewed by the legislature before it can be enforced.
TN now has 2 bills imposing tax on “dealers” without explicit mention of marketplaces:
SB 0082 assigned to Rev subcommittee of Finance on 19-Mar.
HB 0733 referred to House Finance, Ways & Means for hearing
Effective Jan-2020, with thresholds of $100K/200 sales.
Marty Eisenstein provided this update regarding 12-Mar TN AG’s opinion that marketplace facilitators can be deemed dealers.
The AG concluded that marketplace facilitators would be considered “dealers” as to all marketplace sales under TN law. The opinion also concluded that the TN DOR had sufficient authority to promulgate rules and regulations that would require marketplace facilitators to collect any applicable TN sales or use tax on marketplace sales, though there presently is no such explicit requirement.
TN also has 2 “study” bills pending:
SB 0276 is in Sen Finance, Ways & Means as of 26-Mar
HB 0237 in House Finance, ways & means as of 27-Mar
These study bills ask DoR to determine incremental tax rev from remote sellers and deliver the study by Jan-2020.
Virginia Governor Northam signed HB 1722 on 26-Mar. Effective Jul-2019
“Marketplace facilitator” means a person that contracts with a marketplace seller to facilitate, for consideration and regardless of whether such consideration is deducted as fees from transactions, the sale of such marketplace seller’s products through a physical or electronic marketplace operated by such person.
“Marketplace facilitator” does not include a payment processor business appointed by a merchant to handle payment transactions from various channels, such as credit cards and debit cards, and whose sole activity with respect to marketplace sales is to handle transactions between two parties.
“Marketplace facilitator” does not include a platform or forum that exclusively provides internet advertising services, including ads that list products for sale
- Notwithstanding the provisions of subdivisions 1 and 2, the Department shall allow for a waiver from the requirements of subdivisions 1 and 2 if a marketplace facilitator demonstrates, to the satisfaction of the Commissioner, that either (i) all of its marketplace sellers already are registered dealers under § 58.1-613or (ii) the marketplace seller has sufficient nexus to require registration under § 58.1-613and that collection of the tax by the marketplace facilitator for such marketplace seller would create an undue burden or hardship for either party. If such waiver is granted, the tax levied under this chapter shall be collectible from the marketplace seller.
Regarding cities imposing remote sales tax, Law360 reporter asked about cities enacting their own local ordinances to compel remote sales tax collection, citing Philadelphia’s $100K threshold on its Business Income gross receipts tax (1-Feb ordinance). Philadelphia Income tax does apply to shipments from remote sellers.
He asked about legal need for cities to address this. My reply:
First, any city-level sales tax that is administered by the state is going to be assessed, collected, and (presumably) distributed to the city. So cities in SST states don’t need to adopt new tax regulations after Wayfair.
Second, if a city in a non-SST state seeks to impose its sales tax on remote businesses, it would need to follow the 3 tests described in Wayfair: a small business exemption; no retroactivity; and state-level administration, simplification, and free software and services. No city is going to be able to meet the Wayfair standard of state-level tax administration, so would be highly vulnerable to a constitutional challenge for undue burdens.
- Transmitting or communicating an offer or acceptance between a buyer and a seller;
- Owning or operating the infrastructure, electronic or physical, or technology that brings buyers and sellers together; or
- Providing a virtual currency that purchasers are allowed or required to use to purchase products from the seller;
and any of the following
Payment processing services;
Fulfillment or storage services
Listing products for sale
Advertising or promotion
Note this definition does not require payment processing. It’s enough just to list products for sale.
There is some liability relief for marketplaces if the seller gave incorrect information.
A Utah Marketplace bill by Sen. Bramble (SB 168 sub 3)
Passed by Senate 1-Mar by 26-0. Passed House on 12-Mar by 59-7. Sent to Gov on 21-Mar.
Has the broad definition.
MF excludes “ a person that only provides payment processing services.”
Eff Oct-2019 w/SD thresholds
Utah Tax Commissioner John Valentine wants a model marketplace bill for MTC, where he is the new chair.
We shared attachment 5 with Tax Commissioner John Valentine, suggesting:
Narrow MF definition,
Exclude off-platform MF transactions instead of designating a MF for all its transactions.
Reasonable time to implement, and give discretion to Rev Commissioner
In Florida, SB 1112 was reported from Sen Commerce on 11-Mar; now in Sen Finance.
Eff Jul-2019 (p.42)
Adds a new 4.2% tax on rental of real property.
Has broad definition of Marketplace Provider, as one who engages in any of the following activities:
Transmitting or communicating an offer or acceptance between a buyer and a seller;
Owning or operating the infrastructure, electronic or physical, or technology that brings buyers and sellers together; or
Providing a virtual currency that purchasers are allowed or required to use to purchase products from the seller;
software development related to a marketplace
and any of the following
Payment processing services;
Fulfillment or storage services
Listing products for sale
Advertising or promotion
Note this definition does not require payment processing. It’s enough just to list products for sale.
There is some liability relief for marketplaces if the seller gave incorrect information, and class-action protection (p.32)
Sales made on marketplace don’t count against a seller’s small biz threshold. (p.30)
In an Aug-2018 state court filing, Florida attorney general said Wayfair ruling allows tax enforcement for prior years. “Wayfair controls the outcome of this matter, and there is no reason that case should not be applied retrospectively as well as prospectively.”
Did not see anything barring retroactive taxes in the draft bill.
Washington passed legislation to require collection by marketplaces, eliminating the prior option to report sales to the state.
on 11-Mar SB 5581 received Senate concurrence by 37-11 and is now on Governor’s desk.
You can map the bill’s MF obligations against current law for two kinds of tax:
RCW 82.04 Business and occupation tax (0.471 percent of gross retail sales)
RCW 82.08 Retail sales tax (applies to MFs after July 2019)
RCW 82.13 Marketplace Facilitators, remote sellers, and referrers — only thru June 30, 2019
Washington DoR told at least one marketplace:
DoR does not view a transaction as covered unless the fees are specifically for a sale transaction (so a listing fee alone does not meet the marketplace facilitator definition).
DoR also acknowledged a company can be a marketplace facilitator for sometransactions but not for others.
Can members request written clarification from DoR?
“Marketplace facilitator” are counted as “sellers”, and WA used a broad definition, meaning a person that:
(i) contracts with sellers to facilitate for consideration … sale of the seller’s products through a marketplace, and
(ii) engages in communicating the offer or acceptance between the buyer and seller. For purposes of this subsection, mere advertising does not constitute transmitting or otherwise communicating the offer or acceptance between the buyer and seller; and
(iii) engages in specified activities with respect to the seller’s products.
(A) Payment processing services;
(B) Fulfillment or storage services;
(C) Listing products for sale;
(D) Setting prices;
(E) Branding sales as those of the marketplace facilitator;
(F) Taking orders; or
(G) Providing customer service or accepting or assisting with returns or exchanges.
On p.16 see this useless carveout, which does not release anyone who would have been captured:
“Marketplace facilitator” does not include a person who provides internet advertising services, including listing products for sale, so long as the person does not also engage in the activity described in (a)(ii) of this subsection in addition to any of the activities described in (a)(iii) of this subsection
MF excludes “travel agency services” , which means ”arranging or booking for consideration, vacation or travel packages, rental car or other travel reservations or accommodation.”
But … see 15 (b) (ii). “the exclusion does not apply to marketplace that facilitates sale of transient lodging”
Liability relief for errors caused by sellers, up to 5%
Threshold is $100K/200 sales. Based on cumulative gross sales incl for all marketplace sellers.
The nexus standard for sellers is applied retroactively beginning Oct-2018. Only receipts from retail sales sourced to Washington between Oct-2018 thru Dec-2019 count for purposes of the gross receipts threshold.
Beginning Oct-2018, marketplace facilitators must collect and remit retail sales tax on all taxable retail sales made or facilitated by the marketplace facilitator, whether in its own right or as an agent of a marketplace seller
Beginning Jan-2020, collection obligation also applies to any other taxes and fees imposed on a retail sale facilitated by the marketplace facilitator, whether in its own right or as an agent of a marketplace seller. Includes B&O tax
New Hampshire’s Republican governor and House revived legislation to oppose remote state tax imposition.
Last year, Gov Sununu proposed a bill (Special Session S.B. 1-FN) to prohibit tax agencies from outside the state from imposing sales tax on NH sellers. The bill required states to register with the NH AG before. Although unanimously approved by Senate, the bill was gutted by House Republicans who said it would have legitimized the claims of sales tax states on New Hampshire businesses and might be unconstitutional.
Sen. Jeb Bradley (R) has SB 242 that is identical to the governor’s bill from last year.
It passed the Senate 24-0 on 21-Feb. In House Ways & Means.
Republican House members have floated three alternative Wayfair-related bills:
H.B. 114 prohibits NH state from entering into agreements with foreign taxing jurisdictions.
H.B. 698-FN prohibits foreign taxing jurisdictions from imposing sales tax obligations on NH retailers.
H.B. 265 requires Congress to act before allowing NH’s remote sellers to collect other states’ sales tax
Also in California, we have AB 1790, an anti-tech screed that conflates privacy paranoia and TechLash politics.
The twist here is section 2 item 3, forcing marketplaces to add 10% interest to funds they are forwarding to sellers if holding those funds for 90 days.
Wyoming HB0069 was passed and signed by Gov.
Effective 1-Jul-2019, it holds the Marketplace Facilitator liable — even if the marketplace seller is registered in WY.
A Marketplace Facilitator is one who offers a taxable product or service and Directly, or indirectly through any arrangement, collects payment from a purchaser and transmits the payment to the marketplace seller, regardless of whether the person receives compensation or other consideration for facilitating the sale or providing any other service.
Marketplace facilitator is the sole target of audits for sales by marketplace sellers.
Marketplace facilitator is not liable for under-collected tax due to incorrect information furnished by a marketplace seller. But the amount of relief is limited to 5% of the total sales in WY by the Marketplace Facilitator. We have not seen that in other states, and it’s not in SSUTA. If many marketplace sellers made similar mistakes (e.g., mapping their inventory to WY definitions; granting exemptions to schools, etc.), the marketplace could be liable for any under-collected tax in excess of 5% of its total sales into WY.
Prohibits class action lawsuits.
The term Marketplace covers “any method” of selling, so not a facial violation of ITFA.
Hawaii HB113 was introduced 17-Jan. Still in House Finance Committee.
Effective Jan-2020, it defines marketplace facilitator as one who provides a forum, whether physical or electronic, where sellers list or advertise tangible personal property for sale andcollect payment.
Says a MF shall be deemed the seller, and the actual marketplace seller is “making a sale at wholesale”. Anything to that?
Also imposes a reporting requirement on anyone other than a MF who facilitates a sale
HI is not a SST state, so there is no compensation for collection services. Should we request a vendor allowance?
Should we request liability relief, class-action protection, and the Virginia option?
At NCSL in Aug-2018, Hawaii speaker Saiki said HI’s obligation was effective Jul-2018. I reminded him that HI DoR says sellers would be liable for “Catchup” sales taxes to 1-Jul if they reached the threshold before end of 2018. He seemed really concerned and said he would “get that corrected” . However, did see anything barring retroactive taxes in HB113.
Specific definitions for marketplace facilitators, as well as collection, remittance, and administrative matters related to marketplace facilitators, will be considered by the Commission and submitted to the Legislature for consideration in the 2019 Regular Session.
There is currently one judicial determination from a district court that the statutory definition of dealer set forth in LA R.S. 47:301(4)(l) applies to a marketplace program. The decision is on appeal. Remote sellers selling through a marketplace or similar arrangement may register and voluntarily collect in accordance with the guidance in this bulletin.
The draft bulletin indicates a threshold of $50K for reporting obligation; $100K for collection (page 2)
It includes this text regarding expected enactment:
While this collection and remittance provision is voluntary, the Commission will enforce the collection and remittance requirements in accordance with Act 5 of the 2018 Second Extraordinary Session at a date to be determined in 2019. Remote sellers can expect at least thirty days’ notice prior to the commencement of mandatory collection and remittance requirements, but should consider voluntarily collecting and remitting sales tax on remote sales in the interim. Notice will be issued as provided by LA R.S. 47:302(W)(6) following further work of the Commission and LDR. To evaluate the applicability of Act 5’s amount and quantity of sales thresholds, remote sellers will need to consider both sales for delivery into Louisiana during 2018 and 2019.
On 27-Dec the Louisiana Court of Appeals sustained the trial court’s decision that Walmart — as a marketplace facilitator — is liable for sales taxes on sales on its marketplace to Jefferson Parish.
The Court read the definition of “dealer” broadly to include more than just a pure seller, based on finding by the trial court that Walmart was a dealer — because it engaged in solicitation of the market in Jefferson Parish; i.e. it established an economic presence.
The Court rejected a constitutional challenge to the LA statute on the ground that it was not raised at the lower court (trial court decision is attachment 3). Our attorneys at Brann & Isaacson believe that given the complex LA sales tax system, a challenge under the Wayfair factors would be a strong one. I would summarize the Wayfair Factors this way:
In June 2018 the US Supreme Court’s Wayfair decision discarded the 60-year precedent of Quill, so states may now impose sales tax burdens on businesses without a physical presence in their state. The Wayfair goes on to describe how South Dakota’s sales tax law would likely survive a commerce clause challenge as an undue or discriminatory burden on interstate commerce, based on three findings:
“First, the Act applies a safe harbor to those who transact only limited business in South Dakota.
Second, the Act ensures that no obligation to remit the sales tax may be applied retroactively.
Third, South Dakota is one of more than 20 States that have adopted the Streamlined Sales and Use Tax Agreement. This system standardizes taxes to reduce administrative and compliance costs: It requires a single, state level tax administration, uniform definitions of products and services, simplified tax rate structures, and other uniform rules. It also provides sellers access to sales tax administration software paid for by the State. Sellers who choose to use such software are immune from audit liability.” (p.23, Wayfair)
But in the wake of Wayfair, many states have begun enforcing their sales tax laws against businesses anywhere in the country, without first adopting these Wayfair standards. Not a single new state has adopted the Streamlined Sales and Use Tax Agreement, which requires state-level administration of local taxes, uniform definitions and rules, and tax administration services paid for by the states.
New Jersey issued bulletin TB-83 on marketplace sales tax, effective 1-Nov (eBay May-2019, Etsy Apr-2019)
On 16-Nov, NJ updated its FAQ page for remote sellers.
NJ now includes as a Marketplace Facilitator a website that lists items for sale and collects a fee for the listings – even if the site does not process payments or complete the sale. (p.2)
Explains how to request delayed implementation (p.3)
Marketplaces are subject to audit, with some liability protection for marketplace if the seller provides incorrect information. (p.4)
Remember, NJ imposes sales tax on many services, as enumerated in this guide, starting on page 13. So marketplaces for those services face new liability, including home repair, sports events, movie tickets, catering, cleaning, landscaping, and restaurant meals.
Marty says NJ allows some local tax districts to impose half of the statewide sales tax, but only for in-state sellers. Marty Eisenstein believes this is discrimination per Commerce Clause.
District of Columbia
On 13-Nov the DC Council passed an awful ordinance with this mandate on marketplaces: Eff Apr-2019
“marketplace facilitator shall collect and remit sales tax on all sales the marketplace facilitator makes on its own behalf and all sales the marketplace facilitator facilitates on behalf of marketplace sellers to customers in the District of Columbia regardless of whether the marketplace seller for whom sales are facilitated would have been required to collect sales tax had the sale not been facilitated by the marketplace facilitator”
marketplace facilitator” means a person who provides a marketplace that lists, advertises, stores, or processes orders for retail sales subject to tax under this chapter for sale by such marketplace sellers, and directly or indirectly collects payment from a purchaser and remits payment to a marketplace seller regardless of whether the marketplace facilitator receives compensation or other consideration in exchange for its services.
Multistate Tax Commission – MTC Wayfair Implementation and Marketplace Facilitator (MF) Work Group.
MTC issued its final White Paper on 7-Nov, and MTC staff included all three of our comments:
Absent a requirement for Marketplace Sellers to provide instantaneous and automated access to this sale and payment information, the broad definition would not be workable for Marketplace Facilitators. (p.8)
Under either the broad or narrow definitions of Marketplace Facilitator, states should consider extending vendor and/or service provider compensation to Marketplace Facilitators who are performing duties on behalf of the seller, including tax calculation, collection, remittance, and audit. (p. 10)
To be workable for Marketplace Facilitators, a purchaser’s exemption certificate should be applicable to all transactions of that purchaser in the state, for all Marketplace Sellers and for all categories of products. (p.18)
West Virginia Tax Dept gave notice 3-Oct that it will begin enforcing South Dakota-style economic nexus 1-Jan-2019.
South Dakota Gov signed both Post-Wayfair bills that were passed at 12-Sep special session.
SB1 removed injunction for remote sellers other than defendants in South Dakota v. Wayfair, effective Nov-2018.
SB2 taxes marketplace providers on platform sales for platforms that exceed $100K/200 sales, eff Mar-2019. Creates a sales tax license for marketplace facilitators, requiring them to collect and remit the sales tax on behalf of their sellers. And “A marketplace seller making a sale through a marketplace provider that is subject to the provisions of this Act shall consider the sale as a sale for resale.”
South Dakota settled pending lawsuits with NetChoice and with Wayfair on 1-Nov. So, commerce clause challenges would need to be brought against other states.
Maryland approved emergency rule taxing remote vendors over $100K/200 sales beginning Oct-2018. Emergency rule remains until 30-Mar-2019, after which permanent regulations take effect,
Arkansas Tax Reform & Relief Legislative Task Force adopted Final Report on 29-Aug. Recommends law similar to SD. No mention of marketplaces.
Michigan issued an Admin bulletin on 1-Aug, adopting South Dakota’s small biz exception and claiming economic nexus per Wayfair. Collection began Oct-2018.
Avalara list and dates.