10 Questions: The Wayfair Decision - An Update
On June 21, 2018, the United States Supreme Court issued its decision in South Dakota v. Wayfair, Inc., 585 U.S. __ (2018), dramatically changing the sales tax landscape for multi-state retailers. Since that time, 38 states have distributed guidance as to how they expect the Wayfair decision to be applied within their respective jurisdictions, with more to follow.
As this decision has had immediate – and significant – implications to all taxpayers making remote retail sales – of services or tangible property, CohnReznick has developed a portal for our clients and contacts. However, we feel it is imperative every organization who could be impacted become well versed on the procedural changes that will need to take place to keep on top of what is our new reality.
Below are a series of questions asked by attendees of this webinar with answers provided by our CohnReznick subject matter experts.
A. In January 2019, the New York Department of Taxation and Finance issued an important notice alerting taxpayers of the immediate effective date of a previously dormant but existing provision triggering economic nexus for vendors without physical presence in the state. The provision became effective immediately upon Wayfair’s June 21, 2018, elimination of the prohibition on a state imposing sales tax collection responsibilities on businesses without a physical presence in the state. Thus, the sales tax collection obligations under New York’s economic nexus provision began on June 21, 2018.
The Department of Taxation and Finance has initiated a Voluntary Disclosure and Compliance Program for eligible taxpayers who owe back taxes and haven’t filed related returns to avoid monetary penalties and possible criminal charges. Contact our State and Local Tax services staff for a consultation on your eligibility for this and other opportunities for voluntary disclosures in light of Wayfair and the sweeping changes in economic nexus.
A. The taxpayer may have nexus in State X for Year 1. A number of states have enacted click-through nexus provisions for sales of this nature that exceed certain thresholds, which vary from state to state. If State X has a click-through nexus provision on the books, the seller will have nexus in the state if the cumulative gross receipts from sales by the seller to customers who were referred to the seller by all resident influencers receiving a commission from the seller under this type of agreement exceeds the statutory threshold, which is much lower than the threshold for economic nexus. The length of the contract with the influencer (i.e., the affiliate) is irrelevant for purposes of determining a seller’s click-through-nexus. Once click-through nexus is triggered, the seller has nexus in the state for the entire year. Notably, some states have trailing nexus provisions, which would extend the seller’s collection and compliance obligations in the state beyond the year in which they no longer have click-through or economic nexus.
As an example, in Georgia, if the cumulative gross receipts from sales by the seller to customers in the state who are referred to the seller by all residents subject to this type of arrangement exceed $50,000 during the preceding 12 months, the seller has nexus in the state and must collect and remit sales and use tax to Georgia on all taxable sales into the state.
Not all states have click-through nexus provisions in effect, however. Further, several states, including Arkansas and California, have repealed their click-through nexus provisions.
Our State and Local Tax specialists are happy to help taxpayers navigate the dynamic compliance landscape in all states and municipalities. Please reach out to Scott Smith at 973.364.7720 or firstname.lastname@example.org.
Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice specific to, among other things, your individual facts, circumstances and jurisdiction. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.
The Wayfair Decision - An Update
California Revises Economic Nexus Provisions and Enacts Marketplace Facilitator Act