While the U.S. Supreme Court’s South Dakota v. Wayfair decision was announced nearly a year ago, its ripple effects continue to be felt across the retail industry as states.
For example, California Gov. Gavin Newsom last week signed into law an overhaul of the state’s online sales tax regulations that went into effect on April 1. The bill raised the threshold for when out-of-state merchants are required to collect and remit sales tax to $500,000 in California-based revenue in the previous 12 months; the state had been requiring out-of-state retailers to collect and remit sales tax if they generated more than $100,000 of gross sales or services in California and at least 200 transactions annually in the state in the previous 12 months. That change took immediate effect.
The bill also included a marketplace facilitator law that requires online marketplaces such as those operated by Amazon.com Inc. and eBay Inc. to collect and remit sales tax on behalf of sellers. The requirement extends to online marketplaces that have generated at least $500,000 in revenue in California over the previous 12 months. That part of the bill takes effect on Oct. 1.
Overall, California officials expect the bill will generate an additional $759 million in state and local taxes by 2021.
California’s marketplace facilitator law follows a similar form to laws that are already in place in 13 states and territories. The laws “level the playing field for all retailers” by removing the advantage that online retailers had long enjoyed, says Jason Brewer, executive vice president, communications and state affairs at the Retail Industry Leaders Association.
Marketplace facilitator laws are helping states generate a significant amount of revenue. For example, Pennsylvania, which has had a marketplace facilitator law in effect since March 1, 2018, expects to generate about $200 million in online sales tax revenue through the end of the current fiscal year that ends on June 30. That’s roughly four times the initial estimate by the commonwealth’s Department of Revenue estimated that marketplace sales tax revenue would total $50.5 million. Pennsylvania has generated $151.4 million between July 1, 2018 and March 31.
In Massachusetts, Gov. Charlie Baker is looking to out-of-state sales tax to generate more revenue. In his preliminary budget proposal, the governor called for a change to the commonwealth’s threshold to $100,000 in online sales within Massachusetts from its current $500,000 threshold.
Meanwhile, there are a number of sales tax laws making their way through other states, including:
Alabama: A bill introduced last month would increase the tax rate for online sales to 9% from 8%.
Colorado: A bill currently in the state’s house appropriations committee would establish a destination-based sales tax system. That would require online retailers to collect taxes based on the buyer’s address rather than the taxing jurisdictions they share in common with their customers. It would also require out-of-state retailers that generate at least $100,000 in revenue in the state in the previous 12 months to collect and assess taxes based on where their Colorado buyers live. The bill includes a marketplace facilitator bill that would require online marketplaces to collect and remit sales tax on behalf of sellers.
Florida: A proposed bill would require out-of-state sellers that generate $100,000 or at least 200 transactions in the state within the previous 12 months to collect and remit online sales tax. The bill includes a marketplace facilitator provision that would require online marketplaces that generate at least $100,000 to collect and remit sales tax on behalf of sellers.
Missouri: An online sales tax bill is awaiting a vote in the Senate. The legislation would require out-of-state sellers that generate at least $100,000 in revenue in the state to collect and remit sales tax. The bill would take effect Jan. 1, 2020. The same bill includes a marketplace facilitator provision that would require online marketplaces that generate at least $100,000 in the state to collect and remit sales tax on behalf of marketplace sellers as of Jan. 1, 2021.
New York: The state passed a marketplace facilitator law that requires online marketplaces to collect and remit sales tax on behalf of sellers if they generate at least $300,000 in the previous 12 months or more than 100 transactions within the state. The law takes effect Sept. 1.
Texas: The state’s Senate Finance Committee has approved two bills, one that would impact online sellers and another that is a marketplace facilitator law, that would allow Texas to collect sales tax from remote sellers. Because Texas has multiple local taxing jurisdictions with disparate local tax rates, the first bill would create a single, local use tax to avoid placing an undue burden on remote sellers. The second bill would require online marketplaces to collect and remit sales tax from marketplace sellers.
Amazon is No. 3 in the ranking of Internet Retailer Online Marketplaces. EBay is No. 5.