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KPMG report: Follow-up state actions, “Wayfair” decision

Follow-up state actions, “Wayfair” decision

State governments have continued to issue guidance or statements after the U.S. Supreme Court’s decision in “South Dakota v. Wayfair, Inc.” as to how the states will apply the decision.


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In Wayfair, the U.S. Supreme Court overruled the physical presence nexus standard of Quill and National Bellas Hess with respect to state and local taxation of remote sales. Soon after the Supreme Court issued its decision in Wayfair, various states began issuing guidance or statements or began steps to introduce legislation in response to the decision in the Wayfair case. Read TaxNewsFlash

Multiple states

Effective today—October 1, 2018—sellers without a physical presence in the following states must begin collecting tax on sales into the state if they meet the state’s economic nexus threshold:

  • Alabama
  • Illinois
  • Indiana
  • Kentucky
  • Maryland* 
  • Michigan
  • Minnesota
  • New Jersey
  • North Dakota
  • Washington State
  • Wisconsin

*See a fuller discussion below.

District of Columbia

The District of Columbia Council introduced a bill to require a seller that receives gross revenue of more than $100,000 or has 200 or more separate transactions, from the sale of tangible personal property, products transferred electronically, or services into the District within the a 12-month period to register to collect and remit sales and use tax. If approved by the D.C. Council, the bill would become effective upon approval by the mayor, and after a 30-day period of congressional review and publication in the District of Columbia Register. Revenues from the measure would be dedicated to reducing the commercial real estate property tax rate by a specified amount, with any additional revenues accruing to the general fund.


The Director of Revenue confirmed that the state is unlikely to join the Streamlined Sales and Use Tax Agreement (SSUTA). The Department’s position is that it has taken steps to simplify the state’s sales and use tax regime by issuing emergency rules, a FAQs document, and a “Remote Seller Use Tax Matrix” that explains the taxability and applicable tax rate for hundreds of products.


The Comptroller issued a “Tax Alert” explaining the application of the economic nexus threshold to remote sellers. 

The Comptroller adopted an emergency regulation providing that, effective October 1, 2018, an out-of-state vendor is required to collect sales and use tax if, in the previous or current calendar year, the out-of-state vendor received gross revenue of more than $100,000 or engaged in 200 or more separate transactions, from the sale of tangible personal property or taxable services into the state. 

The Tax Alert clarifies that sales transacted prior to October 1, 2018, are not included in determining whether a vendor meets the threshold for collection in 2018. Instead, an out-of-state vendor is to begin tracking its sales into Maryland beginning October 1, 2018. If a vendor meets either threshold during the period October 1, 2018, through December 31, 2018, it is required to register and begin collecting immediately. 

For the 2019 calendar year and subsequent years, out-of-state vendors not previously required to register with the Comptroller are required to track all sales delivered into Maryland, and when either threshold is met, they must register with the Comptroller and begin collecting Maryland tax by the first day on the following month. Once a vendor exceeds the threshold in any calendar year, it is required to collect for the entirety of the next calendar year.


The Department of Revenue issued Technical Information Release 18-8, “Tax Jurisdiction Over Internet Vendors Prior to and Subsequent to Wayfair, Inc. v. South Dakota.” In the TIR, the Department reminded vendors that there has been regulation in place since October 1, 2017, that generally requires an internet vendor with a principal place of business located outside Massachusetts—and not otherwise subject to collection requirements—to register, collect, and remit Massachusetts sales or use tax if, during the prior 12-month period, the vendor had in excess of $500,000 in Massachusetts sales from transactions completed over the internet and made sales resulting in a delivery into the state of 100 or more transactions, provided that the seller has at least one of the following: 

  • A property interest in or the use of software located in the state (e.g., apps or cookies)
  • A contract or relationship with a “content distribution network” or
  • A contract or relationship with a marketplace facilitator or delivery company to provide services such as payment processing, fulfillment and the like

The Department further reminded taxpayers that it is enforcing the regulation for all tax periods after the regulation’s effective date (October 1, 2017) both prior to and subsequent to Wayfair.


A state senator is drafting an economic nexus bill with thresholds that would mimic South Dakota’s law—that is, remote sellers with at least $100,000 in sales in Nebraska or at least 200 transactions per year. The bill would also likely address marketplace facilitators.

New Jersey

The New Jersey Assembly passed Assembly Bill A-4496 to amend the definition of “seller” to include a seller that receives gross revenue of more than $100,000 or has 200 or more separate transactions, from the sale of tangible personal property, specified digital products, or services into the state, within the calendar year or the prior calendar year. 

The definition of “seller” also includes a marketplace facilitator, defined as a person (including any affiliate of the person) that directly or indirectly facilitates a retail sale of tangible personal property, specified digital products, or taxable services on behalf of a marketplace seller. 

“Marketplace seller” is defined to mean a seller that makes retail sales through any physical or electronic marketplace owned, operated, or controlled by a marketplace facilitator, even if such seller would not have been required to collect and pay the tax had the sale not been made through such marketplace. 

Note that the governor in August 2018 conditionally vetoed a similar bill, making suggestions to clarify the obligations of marketplace facilitators. 

New Mexico

New Mexico legislators are considering whether to join SSUTA after a presentation by members of the Multistate Tax Commission outlining the pros and cons of membership. 

South Carolina

The Department of Revenue in September 2018 issued Revenue Ruling #18-14 to explain that remote sellers (including marketplace facilitators) with gross revenue exceeding $100,000, from the sale of tangible personal property, products transferred electronically, and services delivered into South Carolina in the previous or current calendar year have economic nexus with South Carolina. 

The Department in August 2018 released three draft revenue rulings applicable to remote sellers, marketplaces, and marketplace sellers in which the proposed thresholds were $250,000 of gross proceeds from the sale of tangible personal property. The final version of the revenue ruling reduces the sales threshold (aligning it with the South Dakota law) while expanding the computation to include sales of goods delivered electronically and services. 

Remote sellers that establish economic nexus with South Carolina on or after October 1, 2018, are responsible for remitting the sales and use tax for all taxable sales made into South Carolina beginning the first day of the second calendar month after economic nexus is established. The revenue ruling provides for prospective application only, with an enforcement date of November 1, 2018. 

The Department subsequently issued Revenue Ruling # 18-15, explaining that once a retailer has established nexus with the state for sales and use tax purposes, it also must remit local sales and use taxes for every local jurisdiction in which the Department administers such tax. Accordingly, the retailer must remit local sales and use taxes for any local jurisdiction into which deliveries are made by, or on behalf of, the retailer. This is a change in the Department’s prior position and applies to deliveries made on or after November 1, 2018.

South Dakota

The Department of Revenue issued a “Remote Seller Bulletin” explaining that effective November 1, 2018, remote sellers with gross sales of more than $100,000 into the state in the previous or current calendar year, or that have 200 or more transactions for the time period, are required to collect and remit South Dakota tax. The bulletin also reiterates that the Department is legally prohibited from enforcing retroactive tax collection on remote sellers prior to November 1, 2018, and answers certain frequently asked questions (FAQs).

Federal legislative proposal

There has been some Wayfair-related activity on Capitol Hill. Representative Jim Sensenbrenner (R-WI) introduced the “Online Sales Simplicity and Small Business Relief Act of 2018.” This bill, if enacted, would prohibit states from imposing a sales tax collection duty on remote sellers for any sale that occurred prior to June 21, 2018; would provide that states may only impose a sales tax collection duty on remote sellers for sales that occur after January 1, 2019; and would establish a “small business remote seller” exception, defined to mean a remote seller with gross annual receipts in the United States during the preceding calendar year that is not more than $10 million. The bill would further define a remote seller as a seller that has less than 15 days of physical presence in a calendar year. The bill also sets forth a sense of Congress that states need to establish a multistate compact to provide a simplified sales tax administration system for remote sellers.


Read an October 2018 report prepared by KPMG LLP

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