State taxing authorities continue to issue guidance for remote sellers and marketplace facilitators concerning recently enacted remote seller and marketplace nexus laws—generally enacted in response to the U.S. Supreme Court’s decision in “United States v. Wayfair, Inc.”
In addition to state reactions, localities are also responding to the Wayfair decision.
The City Council in Nome, Alaska (a city with a population of less than 5,000 people) adopted an ordinance in late August 2019 providing that a seller will be required to collect Nome local tax if it lacks a physical presence in the city, but in the current or previous calendar year, has gross revenue of $100,000 or more and at least 100 separate transactions from sales of property, digital products or services delivered into the state. The ordinance extends the economic nexus provisions to marketplace facilitators and has an effective date of September 1, 2019 (the first day of the first calendar month following the date the ordinance was passed).
The Department of Revenue created a website with resources and guidance on the new economic nexus standards for remote sellers and marketplace facilitators. Remote sellers and marketplace facilitators can begin registering for “transaction privilege tax” today, September 9, 2019, in advance of the law becoming effective on October 1, 2019.
The Department also established an E-Commerce Compliance and Outreach (ECCO) team to answer questions about the licensing and registration process. In determining whether a remote seller or a marketplace facilitator meets the state’s economic nexus thresholds, remote sellers and marketplace facilitators are to account for income generated by affiliated entities, as well as their own sales. The guidance further provides that remote sellers and marketplace facilitators located outside the state are required to source sales based on the shipping address of the customer (or the billing address if the shipping address is not available). Conversely, a marketplace facilitator located in Arizona will source sales based on the marketplace facilitator’s location in Arizona if the order information is received in Arizona; otherwise, sourcing will be based on the customer’s address if the order information is received outside of Arizona.
A legal opinion (No. 20190501) issued by the Department of Finance and Administration Revenue Legal Counsel clarifies that the economic nexus thresholds that apply to remote sellers and marketplace facilitators are limited to taxable sales of goods, services or specified digital products. Thus, for purposes of determining whether the threshold has been exceeded, a remote seller or marketplace facilitator is not to consider exempt sales.
The Department of Revenue adopted new regulations addressing the state’s economic nexus and marketplace law. The regulations provide that a marketplace seller is not deemed to sell products on a marketplace when merely advertising the products on the marketplace. Further, coupons and discounts offered by marketplace facilitators and remote sellers are “retailer’s discounts” that reduce the taxable amount of a sale. Finally, the regulations provide that marketplace facilitators can claim a credit for previously remitted sales taxes associated with items returned by customers when the refund is or may be issued by the marketplace facilitator or marketplace seller.
The Department of Taxation launched a webpage for use by out-of-state sellers and marketplace facilitators. The webpage contains information on registration requirements for out-of-state sellers and marketplace facilitators. Although Ohio retains its origin-based sourcing rules for intrastate sales of tangible personal property, the Department reminded taxpayers that sales made by a marketplace facilitator will be sourced to “the location where the consumer receives the property or service that is sold.”
The Department of Revenue issued guidance (Rev. Rul. 2019-6) to address the sales and use tax obligations of marketplace facilitators. The revenue ruling states that “marketplace facilitators” can include brick and mortar retailers, online retailers, and online food delivery service companies. The ruling also includes examples of different marketplace transactions and addresses the sales and use tax responsibility of each party.
Read a September 2019 report prepared by KPMG LLP
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