United States

Alabama: Pending Legislation Requires Marketplaces to Collect or Report; Modifies the Simplified Sellers Use Tax Remittance Program

Apr 09, 2018
From KPMG TaxWatch

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House Bill 470, which has been presented to Governor Ivey for signature, is primarily aimed at collecting tax on sales made through online marketplaces. By January 1, 2019, certain “marketplace facilitators” must either (1) register to collect and remit simplified sellers use tax (SSUT) on sales facilitated by the marketplace and delivered in Alabama, or (2) comply with unspecified notice and reporting requirements. A “marketplace facilitator” is defined as a person that contracts with retailers to facilitate the sale of the retailers’ products through a physical or electronic marketplace for consideration and that engages (directly or indirectly through an affiliate) in any of a number of listed activities. The specified activities are quite broad and include, for example, taxpayers engaged in R&D related to payment processing services and other marketplace activities. Only facilitators with $250,000 of sales (or an amount as otherwise prescribed by the Department) are required to collect or report.The qualifying amount includes sales made by marketplace sellers (as defined) through the marketplace, as well as the marketplace facilitator’s own sales. Alabama localities cannot audit either the marketplace facilitator or a marketplace seller for sales on which the marketplace facilitator collected SSUT. If a marketplace facilitator does not collect and remit SSUT, it must provide certain notices to customers and report sales to the Department. The details of the notice and reporting requirements will be left to the Department. Recall, last year the legislature enacted a bill allowing the Department to develop use tax notice and reporting requirements and applicable penalties.

House Bill 470 also makes several modifications to the SSUT remittance program. Historically, this program has allowed certain remote sellers to collect and remit directly to Alabama Department of Revenue a flat eight percent tax on all sales made into Alabama. This is in lieu of complying with multiple city and county taxes, with varied rates, many of which are not administered by the Department. Currently, participating sellers receive a vendor’s discount equal to two percent of the tax collected and remitted. House Bill 470 caps the discount starting January 1, 2019 to the first $400,000 of tax collected and remitted. Currently, a remote seller may not participate in the SSUT program if it is related to an in-state business and the entities share one of a number of characteristics (use the same trademarks, share a common business plan, etc.). House Bill 470 clarifies that a participating remote seller that acquires an in-state business and thereafter otherwise falls within the affiliate nexus provisions may nonetheless continue to participate in the SSUT remittance program. Finally, under current law, a remote seller that pays SSUT higher than the actual state and local sales tax levied in the locality where the sale was delivered may file for a refund or credit of the excess amount. House Bill 470 requires that by January 1, 2019, the Department must initiate an online application process for these refunds. Please contact Scott Jackson at 404.614. 8688 with questions.

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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.