A new landmark sales tax statute has been adopted in Minnesota, which expands sales tax collection requirements to those retailers that sell their goods on certain "marketplaces." Generally, only a retailer that is physically present in a state is required to collect and remit the state's sales tax. The US Constitution's dormant Commerce Clause requires that a person or transaction have "substantial nexus" with a state before the state may impose its sales tax on that person or transaction. Complete Auto Transit v. Brady, 430 U.S. 274 (1977).

In 1992, the US Supreme Court clarified in Quill Corp. vs. North Dakota, 504 U.S. 298 (1992), that "substantial nexus" only exists when there is a non-trivial physical presence for sales tax purposes.

Given the changes in technology and consumer sophistication since Quill was decided, states have been enacting broader sales tax nexus laws in an effort to increase revenues, especially from ecommerce. There also have been various attempts to expand the definition of substantial nexus or what constitutes a physical presence.

In the most recent attempt, Minnesota statutorily expanded its sales tax collection obligation to "marketplace providers" that provide their platforms to retailers to sell their goods. On May 30, 2017, H.F. 1 was passed, which effectively creates a sales tax collection requirement for any retailer that makes sales through a "marketplace provider," even if the retailer is not actually physically present in Minnesota. The legislation also requires a "marketplace provider" to collect and remit sales tax for the retailer's sales it facilitates. A "marketplace provider" is defined as "any person who facilitates a retail sale by a retailer" by: (1) listing or advertising sales by the retailer; and (2) collecting payments from the retailer's customers and transmitting those payments to the retailer.

A marketplace provider is obligated to collect and remit Minnesota sales tax regardless of whether it facilitates payment collection and transmission or whether the marketplace provider is compensated for its services. The marketplace provider is relieved of its collection obligation if the retailer is already registered to collect Minnesota sales tax. There is also a de minimis threshold--if a retailer makes less than $10,000 in taxable sales in the previous year, then there is no collection obligation. The law goes into effect on July 1, 2019, or sooner if the US Supreme Court overturns Quill.

Minnesota became the first state to enact this type of law. Other states are quickly joining Minnesota, including Washington, which also extended sales tax collection obligations to marketplace operators on July 7, 2017 (H.B. 2163).