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Sales Tax Nexus Legislation Was One of the Biggest Trends in State Legislatures This Year

By Liz Malm | August 23, 2016
Topics: Tax

UPDATED: The latest legislative update on nexus is available here and background on current law can be found here.

Legislation addressing sales tax nexus has been a major trend across the country this year as states pursue strategies to overturn Quill after Justice Kennedy's invitation to present an opportunity for the Court to review its precedent back in March 2015 (read more on that here). 42 bills were introduced in 16 states, with four bills ultimately enacted (Louisiana, Oklahoma, South Dakota, and Vermont) and one still in play (Ohio).

In South Dakota, litigation is already under way, with the state having sued three remote sellers earlier this year. Litigation has also been initiated in Alabama. Alabama adopted an economic nexus position—asserting substantial nexus based on economic activity rather than physical presence—via the regulatory process, effective January 1. Tennessee is pursuing a similar path to that of Alabama, with a proposed economic nexus rule that would take effect next July currently pending legislative review.

Nexus bills in the 2016 legislative session

 

The purpose of all of these bills was the same: to enhance sales tax compliance by as many sellers as possible. However, states took several different kinds of approaches to achieve this end. Ultimately, states pursued three general legislative strategies. (Keep in mind that many states pursued several of these strategies at once, sometimes within one bill and sometimes within multiple bills. Full details of each bill in each state can be found in the table at the end of this article).

The first was legislation changing nexus requirements. These types of bills took several forms. For example, some states created affiliate or economic nexus requirements, while others imposed requirements on marketplace providers of required referral registration. States with these types of bills were Connecticut, Idaho, Louisiana, Massachusetts, Minnesota, Mississippi, Nebraska, Ohio, Oklahoma, Rhode Island, South Dakota, and Utah. This was by far the most prevalent type of legislation.

The second approach was legislation imposing reporting or notification requirements. States pursuing this approach were Kansas, Louisiana, Minnesota, and Vermont. The third “approach” is less of an approach and more of a catch-all category for those states that didn't pursue the first two strategies. In this miscellaneous category were bills preparing for federal action (Illinois and Massachusetts), study bills (Nebraska), and a bill in Alabama that doesn't quite fit into any other category but is related.

The table below contains a full list of legislation that appeared in 2016, including a brief description and current status.

State Bill Number Summary STATUS
Alabama H.B. 116 Allows remote sellers to continue to continue participate in the Simplified Seller Remittance Program even if they establish physical nexus within the state or if the federal government removes current sales tax limitations. DEAD
Connecticut S.B. 448 Changes the definition of retailer engaged in business in the state to include those who purposefully direct business in the state as evidenced by frequency, quantity, and systemic nature of the retailer’s economic contacts with this state. DEAD
Idaho H.B. 581 Changes the definition of “retailer engaged in business in this state” to include having an in-state intermediary perform certain services on the vendor’s behalf, including: regularly soliciting sales within the state, maintaining storage or distribution facilities, or facilitating the deliver or repair of sold property. DEAD
  H.B. 633 Changes the definition of “retailer engaged in business in this state” to include having an in-state intermediary perform certain services on the vendor’s behalf, including: regularly soliciting sales within the state, maintaining storage or distribution facilities, or facilitating the deliver or repair of sold property. DEAD
Illinois S.B. 2793 Shell bill titled “Creates the Marketplace Fairness Act.” DEAD
Kansas H.B. 2603 Requires the state to inform individuals of their obligation to remit the sales tax on remote purchases. DEAD
Louisiana H.B. 6
(1st Extraordinary Session, not 2016 Regular Session)
Presumes sales tax nexus if a seller utilizes an in-state affiliate to advertise, promote, facilitate or refer sales or to facilitate the delivery of sales. DEAD
  H.B. 30
(1st Extraordinary Session, not 2016 Regular Session)
Presumes sales tax nexus if a seller utilizes an in-state affiliate to advertise, promote, facilitate or refer sales or to facilitate the delivery of sales. ENACTED
  H.B. 96
(1st Extraordinary Session, not 2016 Regular Session)
Presumes sales tax nexus if a seller utilizes an in-state affiliate to advertise, promote, facilitate or refer sales or to facilitate the delivery of sales. DEAD
  H.B. 110
(1st Extraordinary Session, not 2016 Regular Session)
Establishes than a remote sellers will be presumed to have nexus with the state if it has in excess of $50,000 worth of sales into the state in a calendar year and establishes when a marketplace provider could be required to collect and remit the state sales tax. DEAD
  H.B. 113
(1st Extraordinary Session, not 2016 Regular Session)
Requires remote sellers to provide notice to instate purchasers that the Louisiana sales tax may be due at the time of purchase. DEAD
  H.B. 96
(Regular Session)
Changes the definition of “dealer” and “doing business” to expand the sales tax nexus to include solicitation of business through third parties, holding a substantial ownership interest in an in state retailer, or utilizing an in-state marketplace provider. DEAD
  H.B. 1121
(Regular Session)
Requires remote sellers to notify their buyers of any tax liability created by their purchase. DEAD
  H.B. 1037
(Regular Session)
Requires remote sellers to notify their buyers of any tax liability created by their purchase. DEAD
Massachusetts H.B. 2628 Authorizes state taxing authorities to collect sales tax from remote sellers and reduce the sales tax rate to 5.75 percent DEAD
  S.B. 1541 Authorizes state taxing authorities to collect sales tax from remote sellers in anticipation of federal action on this subject. DEAD
  S.B. 1618 Changes the definition of “engaged in business in the commonwealth” to include having an in-state intermediary perform certain services on the vendor’s behalf, including: regularly soliciting sales within the state, maintaining storage or distribution facilities, or facilitating the deliver or repair of sold property. DEAD
  S.B. 1974 Authorizes state taxing authorities to collect sales tax from remote sellers in anticipation of federal action on this subject. DEAD
Minnesota S.F. 2374 Presumes sales tax nexus if a seller utilizes an in-state affiliate to advertise, promote, facilitate or refer sales or to facilitate the delivery of sales. DEAD
  H.F. 2769 Requires out of state sellers to collect sales taxes if they engage in business with an instate marketplace provider, directly solicit business from inside the state (either directly or through software applications), or “[conduct] any part of the sale process in the state.” DEAD
  S.F. 3093 Expanding the state’s sales tax nexus standards to require tax collection from sellers who engage in direct marketing in the state, actively distributing sales materials in the state, “conducting any part of the sale process in the state,” utilizing an in state marketplace provider, or contracting with an instate affiliate for business purposes. DEAD
  H.F. 3787 Requires remote sellers to collect and remit the state sales tax if they make systematic solicitations into the state making more than 200 individual sales into the state over a one year period or if they make 20 or more unique sales totaling more than $200,000 over the same period. DEAD
  S.B. 848
(Tax Omnibus Bill)
Requires "marketplace providers" or "marketplace sellers" to collect and remit sales taxes and it expands the definition of an "affiliate" for sales tax purposes. DEAD
Mississippi H.B. 418 Revises the definition of “retailer,” “retail sale,” and “doing business” for the purposes of the sales tax. DEAD
  H.B. 1693 Redefines “doing business” to include regularly selling goods or products within the state, regularly soliciting business from potential instate customers, issuing stored value cards to instate customers, entering into franchise or licensing agreements with instate parties, or entering into transactions involving intangible personal property. The bill also implements a market-based sourcing regime that apportions income from a sold service to the jurisdiction where the benefit is received. DEAD
  H.B. 1676 Redefines “doing business” to include regularly selling goods or products within the state, regularly soliciting business from potential instate customers, issuing stored value cards to instate customers, entering into franchise or licensing agreements with instate parties, or entering into transactions involving intangible personal property. The bill also implements a market-based sourcing regime that apportions income from a sold service to the jurisdiction where the benefit is received. DEAD
  S.B. 2052 Revises the definition of “retailer”, “retail sale”, and “doing business” for the purposes of the sales tax. DEAD
Nebraska L.B. 1087 Presumes sales tax nexus either if any one of several criteria are met, including: a seller using an in-state affiliate to facilitate their operations, utilizing an in-state marketplace provider, or having cumulative sales into the state in excess of $10,000 in the previous year. DEAD
  L.R. 511 Chartering an interim study to examine existing law governing the collection of sales and use tax on remote sales. DEAD
Ohio H.B. 232 Presumes sales tax nexus if a seller utilizes an in-state affiliate to advertise, promote, facilitate or refer sales or to facilitate the delivery of sales. ACTIVE
Oklahoma H.B. 2925 Presumes sales tax nexus if a seller utilizes an in-state affiliate to advertise, promote, facilitate or refer sales or to facilitate the delivery of sales. DEAD
  S.B. 1251 Specifically requires all remotes sellers to collect and remit the state sales tax if they have in-state gross annual receipts in the state in excess of $1 million. DEAD
  S.B. 1301 Presumes sales tax nexus if a seller utilizes an in-state affiliate to advertise, promote, facilitate or refer sales or to facilitate the delivery of sales. DEAD
  H.B. 2531 Presumes nexus within the state if a seller maintains a continuing relationship with an in-state third party that sells a similar line of products, bears similar trademarks as the seller, or facilitates in the delivery, installation, or maintenance of seller’s goods. ENACTED
Rhode Island H.B. 7230 Changes the definition of “retailer” to specify that referring customers to a retailer only through a link on a website does not constitute nexus for purposes of the sales tax. DEAD
  H.B. 7375 Presumes sales tax nexus either if any one of several criteria are met, including: a seller using an in-state affiliate to facilitate their operations, utilizing an in-state marketplace provider, or having cumulative sales into the state in excess of $10,000 in the previous year. DEAD
South Dakota S.B. 106 Stipulates that an out of state seller has nexus with the state for sales tax purposes if their gross revenue from sales into the state exceeds $100,000 in the previous year or if they engaged in 200 or more separate transactions. ENACTED
Utah H.B. 235 Presumes sales tax nexus if a seller utilizes an in-state affiliate to advertise, promote, facilitate or refer sales or to facilitate the delivery of sales. DEAD
  S.B. 65 Requires the owner of every in-state selling platform to file an annual report with the state of each seller who uses the platform, but does not collect the sales tax. DEAD
  S.B. 85 Presumes sales tax nexus if a seller utilizes an in-state affiliate to advertise, promote, facilitate or refer sales or to facilitate the delivery of sales. DEAD
  S.B. 182 Creates a rebuttable presumption that a seller of goods or services has nexus if they have in-state affiliates who facilitate the delivery, installation, assembly, maintenance of their sales; if the affiliate shares management, business system, or employees with the seller; of if the affiliate and the seller share intercompany transactions. DEAD
Vermont H. 873  Requires remot sellers to notify thier customers that they are supposed to pay on remote purchases. ENACTED

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