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KPMG report: State legislative proposals, economic nexus for retailers

State legislative proposals, economic nexus—retailers

Legislation has been proposed in a number of states that would either adopt economic nexus for retailers and marketplace facilitators or expand the state’s current economic nexus provisions. The tax departments in certain states have issued guidance that revises or updates existing sales and use tax collection guidelines.


Related content

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 administrative guidance or statements or began to take legislative actions in response to the decision in the Wayfair case. Read TaxNewsFlash

Summary of legislation in multiple states

  • Arkansas, Arizona, Missouri, and New Mexico have each proposed legislation that would establish a sales tax collection and remittance obligation on remote sellers and/or marketplace facilitators.
  • Oklahoma enacted last year a “collect or report” requirement for remote sellers and marketplaces, and is considering three pieces of Wayfair-related legislation that would eliminate the current “collect or report” option for remote sellers, but not for marketplace facilitators or referrers.
  • The Georgia legislature is considering similar legislation that would beginning in 2020, lower the economic nexus threshold adopted last year from $250,000 to $100,000 of receipts and convert the “collect or report” option to a collection only requirement for affected sellers.
  • Lawmakers in Indiana, Nebraska, Vermont, and West Virginia have proposed legislation that would expand each state’s existing economic nexus thresholds and sales tax collection and remittance obligations to marketplace facilitators.
  • In Tennessee and in Maryland, proposed legislation would codify existing regulations imposing collection obligations on remote sellers.
  • In Colorado, a bill would modify existing provisions affecting remote sellers, and would codify destination-sourcing rules adopted by the Department of Revenue for sales into Colorado.
  • Missouri and Connecticut have introduced legislation that would bring the state into compliance with the Streamlined Sales and Use Tax Agreement (SSUTA).


In Alaska, there is no statewide sales tax. However, many municipalities impose local sales and use taxes and have started considering what would be needed to require remote sellers to collect the local sales taxes. The Alaska Municipal League started working with localities to develop a uniform local sales tax ordinance, and create a centralized system for collecting and distributing revenue generated from remote sales. This project is in the early stages.  


Legislation to establish a sales tax collection and remittance obligation on remote sellers and/or marketplace facilitators has been proposed. The Arizona legislation would obligate remote sellers and marketplace facilitators meeting certain sales thresholds to collect a “transaction privilege tax” on sales into the state. The bill would also authorize municipalities to impose a collection obligation on remote sellers (other than those selling through a marketplace) only if the municipality conformed its local privilege tax to certain aspects of the state tax, including retail classifications, the taxation of food for home consumption, and certain definitions.


The General Assembly passed two bills (House Bill 1722 and Senate Bill 1083) that if enacted would require certain remote sellers and marketplace facilitators to collect state and local sales taxes on sales into Virginia. Under the legislation, a remote seller would be required to collect tax if the seller receives $100,000 or more in gross revenue or engages in 200 or more separate transactions in Virginia in the previous or current calendar year.

The bills define a marketplace facilitator as a person that, either directly or indirectly: (1) engages in transmitting or communicating an offer or acceptance between a marketplace seller and a purchaser; (2) owns or operates the infrastructure for bringing sellers and purchasers together; or (3) provides a virtual currency for making marketplace purchases and engages in one or more of several specified facilitation activities such as processing payments, listing products, and fulfillment and storage. A marketplace does not include an entity whose only activity is processing payments between two parties.

A marketplace facilitator meeting the economic nexus threshold of $100,000 in gross revenue or 200 retail sale transactions would be treated as a dealer for tax collection purposes and would be required to collect tax on all sales made directly or facilitated by the marketplace. Conversely, no marketplace seller is to collect sales and use tax on a transaction made through a marketplace facilitator's marketplace. The collection requirement for a marketplace facilitator may be waived by the Department of Taxation if the marketplace can demonstrate that all sellers for which it facilitates sales are registered with the Department or the seller meets the requirements to be registered for tax collection and having the tax collected by the marketplace would impose an undue burden or hardship on the seller or the marketplace.

The bills also provide that remote sellers and marketplaces must receive at least 30 days of advance notice of any local tax rate changes.

If signed by the governor, the bills would apply to sales made after July 1, 2019, but sales made prior to July 1, 2019, could be considered in determining if a seller meets the economic nexus threshold. In addition, upon an application showing “good cause,” the Department could waive or suspend the collection or reporting requirements as applied to a marketplace facilitator for a period of not more than 90 days past July 1, 2019.

Washington State

In Washington State, two bills are intended to clarify and simplify the state’s current sales and use tax and “business and occupation” (B&O) tax nexus provisions. These bills, if enacted, would adopt a single economic nexus threshold of $100,000 for sales and use tax and B&O tax. They also would eliminate a “collect or report” obligation imposed on certain sellers and marketplaces that are below the $100,000 threshold. Effective January 1, 2020, the transactions threshold would be eliminated. The bills also clarify that any person or business entity establishing nexus for B&O and retail sales tax purposes would be required to pay all other applicable taxes and fees administered by the Washington Department of Revenue, beginning on January 1, 2020. The state Senate approved one bill on February 15, 2019.

Administrative action by states

States have continued to issue or revise guidance on existing sales and use tax collection obligations.

  • The Illinois Department of Revenue issued draft regulations that would provide regulatory guidance for remote sellers and/or marketplace facilitators. 
  • The Iowa Department of Revenue issued proposed regulations that address some of the complexities that arise in the context of marketplace sales.
  • The Wisconsin Department of Revenue revised a sales and use tax publication to provide additional information on the sales tax collection obligation of remote sellers. The guidance clarifies that a “year” is the retailer’s tax year for federal income tax purposes. In determining whether the retailer has exceeded the threshold, retailers must account for both taxable and nontaxable sales and consider each periodic payment of a lease or license as a separate transaction. Further, advance deposits are not considered sales transactions.
  • The Michigan Department of Revenue published a list of “frequently asked questions” (FAQs) for remote sellers to address the sales tax obligations of a remote seller. The FAQs clarify that wholesalers with no retail sales are not required to register with Michigan because wholesale sales are not subject to tax—even if the wholesaler exceeds the economic nexus thresholds of $100,000 in receipts or 200 transaction (thresholds that were effective October 1, 2018). The FAQs also provide that remote sellers exceeding the threshold in 2018, but before October 1, 2018, are to begin collecting and remitting sales tax on sales beginning January 1, 2019.


Read a February 2019 report prepared by KPMG LLP

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