For our final Marketplace Monday of 2019, we look back at what happened this year, what people are talking about and what to expect in 2020. Prior to 2019, only seven states had marketplace collection laws or guidance requiring marketplace collection in effect. However, in 2019 a record number of states passed state tax marketplace collection laws. We expect marketplace collection to be a hot topic in 2020 as the states continue to pass and tinker with these laws.
- In 2019, thirty-two states, including the District of Columbia (DC), enacted marketplace collection legislation and/or had marketplace collection laws go into effect on or after January 1, 2019.
- As of December 23rd, thirty-nine states have enacted marketplace collection laws.
- As of December 23rd, only seven states have not enacted marketplace collection laws – Florida, Georgia, Kansas, Louisiana, Mississippi, Missouri and Tennessee.
- Four states amended their existing marketplace collection laws or guidance:
- Minnesota passed a more common marketplace collection law to capture marketplace facilitators that do not have a physical presence in the state;
- Oklahoma amended its marketplace collection law to modify, among other things, which marketplace facilitators are required to collect and remit sales tax or comply with notice and reporting requirements;
- South Carolina passed S.B. 214 officially adopting marketplace collection after the South Carolina Department of Revenue issued Revenue Ruling 18-14 (9/19/2018) requiring marketplace collection, and
- Washington State replaced its original marketplace collection law to, among other things, require marketplace facilitators (effective 1/1/2020) to expand its marketplace law to other Washington taxes imposed on a buyer and that the seller is required to collect and pay over to the Department of Revenue.
- The Multistate Tax Commission (MTC) Wayfair Implementation and Marketplace Facilitator Work Group (the Marketplace Group) released a final white paper on 12/13/2019 addressing issues arising from the states’ marketplace facilitator laws. The white paper notes the Marketplace Group’s thirteen priority issues:
- Definition of marketplace facilitator/provider.
- Who is the retailer?
- Remote seller and marketplace seller vs. marketplace facilitator/provider recordkeeping, audit exposure and liability protection.
- Marketplace seller-marketplace facilitator/provider information requirements.
- Collection responsibility/determination.
- Marketplace seller economic nexus threshold calculation.
- Remote seller sales/use tax economic nexus threshold issues.
- Certification requirements.
- Information sharing.
- Taxability determination.
- Return simplification.
- Foreign sellers.
- Local sales/use taxes.
What Marketplaces are Talking About
- A majority of the marketplace collection discussions are reflected in the Marketplace Group’s thirteen priority issues, with significant outstanding questions on the application of state marketplace collection laws to:
- Local sales/use taxes;
- Foreign sellers, and
- Marketplace facilitator certification requirements.
- What, if any, are the income tax implications from marketplace facilitator’s sales and use tax registrations?
- Do/will marketplace collection laws require marketplaces to collect additional taxes and fees?
- States and industry groups have been in discussions for explicit carve-outs from marketplace collection requirements for, among others, payment processors and online travel companies (OTCs).
- Litigation in Louisiana and South Carolina challenging marketplace collection assertions by states/localities without marketplace collection laws.
What to Expect in 2020
- It is anticipated that the remaining states (Florida, Georgia, Kansas, Louisiana, Mississippi, Missouri and Tennessee) will enact marketplace collection.
- Those states with marketplace collection laws will further refine their collection laws to address concerns regarding the breadth of the current marketplace collection laws in some states.
- A decision from the Louisiana Supreme Court in Normand v. Wal-Mart.com USA LLC, No. 2019-C-263, addressing whether there is a requirement for marketplaces to collect local sales and use taxes (Jefferson Parish) in the absence of a marketplace collection law.
- Alaska localities implementation of a single-level statewide administration of marketplace collection pursuant to the Alaska Municipal League’s Alaska Intergovernmental Remote Sales Tax Agreement.