The U.S. Supreme Court in the 2018 decision “South Dakota v. Wayfair, Inc.” overruled the physical presence nexus standard of “Quill” and “National Bellas Hess” with respect to state and local taxation of remote sales.
As state legislative sessions move into full swing, significant attention and activity have focused on leveraging the Wayfair decision to impose sales and use tax obligations on marketplace facilitators. While states are defining marketplace facilitators differently, the measures under consideration generally apply to the operators of platforms that are used to advertise for sale the goods and services of multiple sellers and for which the operator, either directly or indirectly, provides the transmission of orders and acceptances between the buyer and seller and processes the payment for a consummated transaction.
In recent weeks, legislatures in a number of states have passed measures that are in various stages of being presented to the governor for signature, or that are expected to be acted on shortly.
In an administrative action, the Tennessee attorney general issued an opinion (No. 19-03), per the request of the majority leader of the state’s House of Representatives, concluding that an “online marketplace facilitator”—defined as the provider of a platform used by third-party sellers to solicit sales of goods and services to Tennessee customers that also accepts the customer’s purchase information and executes the sales transaction on behalf of the third-party seller—would be considered to be soliciting sales in Tennessee and would be considered a “dealer” under Tennessee’s “doing business” statute. The state’s attorney general further opined that the Department of Revenue could require such online marketplace facilitators to collect the Tennessee sales and use tax due on sales made by out-of-state third-party sellers through the marketplace, provided that the online marketplace was not itself an out-of-state dealer (i.e., the marketplace had nexus in Tennessee under traditional nexus standards). Note that Tennessee is enjoined from enforcing an economic nexus standard until the legislature approves the rule promulgated by the Department last year.
Read a March 2019 report prepared by KPMG LLP
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