E-commerce continues to be a booming industry, so it should be no surprise that enforcing tax collection by out-of-state sellers is at the top of many, if not most, states’ agendas. Accordingly, we continue to see states taking steps to close the gap on remote seller tax collection. South Carolina and Minnesota are just the latest states to take legislative action. Please see below for information on the nexus changes that are potentially coming our way:
On January 10, 2017, SB 214 was introduced in the South Carolina Senate. The bill creates a rebuttable presumption that a retailer will be held liable for sales tax if they enter into an agreement with a South Carolina resident, whereby the resident refers potential customers via website links or other means in return for some sort of consideration. The presumption will only apply if the referrals result in more than $10,000 in gross proceeds during the prior 12-month period.
On January 9, 2017, S.F. 45 was introduced in the Minnesota Senate. The bill expands the definition of “retailer maintaining a place of business in this state” to include, among other things, a retailer with a marketplace provider operating in the state. A marketplace provider is one who facilitates retail sales by the out-of-state retailer, by listing or advertising for sale the retailer’s items or services in any forum, either directly or indirectly through agreements or arrangements with third parties who collect payment and transmit it to the retailer. Whether or not the marketplace provider receives payment for its service is immaterial.
We expect to see several more states advance legislation this year seeking to impose a tax collection obligation on e-commerce retailers. While e-commerce revenue will attract the most attention, we also expect some states to give serious consideration to expanding their tax base to include more services along with evaluating the revenue implications from the sharing economy.