United States

Multistate: Two Additional States Propose Economic Nexus for Sales Tax Purposes

Jan 16, 2017
From KPMG TaxWatch

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Currently, South Dakota, Alabama, and Tennessee have all adopted economic nexus provisions for sales tax purposes. These provisions are designed to spur litigation over the physical presence rule articulated in the 1992 Quill case. Additionally, legislation was recently proposed in Wyoming that would likewise adopt an economic nexus standard for sales and use tax. This week, a few more states jumped on the bandwagon.

In Nebraska, Legislative Bill 44, as introduced, would require a remote seller to collect and remit state and local sales and use tax if the seller has a physical presence in Nebraska or one of the following conditions are met: (1) the remote seller’s gross revenues  from the sale of tangible personal property, goods delivered electronically, or services delivered into Nebraska exceeds $100,000 or (2) the remote seller sells tangible personal property, goods delivered electronically, or services into Nebraska in 200 or more separate sales transactions. Remote sellers that meet one of these conditions, but that do not collect tax on sales to Nebraska purchasers would be required to adhere to three reporting requirements. The first is that the remote seller would be required to inform the buyer at the time a purchase is made that use tax may be due and that Nebraska requires purchasers to file returns and pay use tax directly to the state. Second, the remote seller would be required to provide each purchaser with a statement by January 31 of each year showing the general types and volume of purchases made during the prior year. Finally, remote retailers would be required to file an annual report by March 1 with the Department of Revenue identifying the name and address of each purchaser and the general type and volume of purchases made by such customer. Failure to comply with these notice requirements would subject the remote seller to penalties. LB 44 contains an emergency clause making it effective when adopted as required by law.

In Mississippi, House Bill 480, as introduced in the House of Representatives, would revise the definition of “person doing business” in Mississippi to include retailers that lack a physical presence in the state, but that have a substantial economic presence in the state. A substantial economic presence means that the retailer’s retail sales of tangible personal property into Mississippi exceed $250,000 based on the immediately preceding calendar year’s sales. If enacted, these provisions would be effective July 1, 2017. Interestingly, neither of these bills addresses the litigation that might ensue over the constitutionality of these provisions or provides for an injunction against the enforcement of these provisions during the pendency of such litigation. Please stay tuned to TWIST for future updates on these bills.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.