New State Use Tax Reporting Requirements

By Jeannette Marchant on July 27, 2017
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Jeannette Marchant

new state use tax reporting requirements

More Use Tax Compliance Requirements, More Headaches on the Horizon.

In Quill Corp v. North Dakota, the Supreme Court established that for states to have the authority to require an out-of-state business to collect sales tax, that business must have a physical presence within the state.  

Several states, including Indiana, Maine, Massachusetts, North Dakota, Ohio, South Dakota, Tennessee, and Wyoming, are directly challenging this standard and have passed laws that require out-of-state vendors to collect sales tax without physical presence. These states argue that if a remote vendor makes over 100 (MA) or 200 (IN, ME, ND, OH, SD, WY) separate transactions to customers in the state or sell over $100,000 (IN, ME, ND, OH, SD, WY) or $500,000 (MA, TN) annually into the state then nexus is established for sales tax purposes.

Your company may be facing new sales tax compliance or reporting requirements in five, and possibly up to 10 states where you are selling products or services, but don’t have a physical presence.  

New State Use Tax Reporting Requirements on the Books Effective July 1, 2017

Four states are introducing new use tax reporting requirements, effective July 1, 2017, for remote vendors in place of passing laws that contradict the physical presence standard.  

These reporting requirements call for out-of-state businesses to either alert their customers of their responsibility to remit use tax or to report directly to the state customer information so that the states can ensure the proper remittance of use tax.  

A brief summary of the states that have enacted new reporting requirements is listed below:

Alabama – Effective July 1, 2017: Legislation was passed that allows the Alabama Department of Revenue to now have the authority to require non-collecting vendors to notify Alabama customers of use tax obligations.

Colorado – Effective July 1, 2017: Non-collecting sellers with annual Colorado sales over $100,000 are required to report to the Colorado Department of Revenue customer information each year. Sellers must also report customers with purchases over $500 each year of their obligation to pay use tax.

Louisiana – Effective July 1, 2017: Out-of-state vendors with sales greater than $50,000 annually must inform Louisiana customers at the time of the transaction that the sale is subject to use tax. Vendors must also provide an annual statement to their customers by January 31st each year indicating the total purchases for the year. An annual report must be sent to the Louisiana Department of Revenue by March 1st in addition to the customer notification.

Oklahoma – Effective February 1, 2017: Out-of-state sellers must notify Oklahoma purchasers of their total purchases for the year by February 1st each year.  

Vermont – Effective July 1, 2017: Vendors with over $100,000 in Vermont sales in the previous calendar year must provide a notice to their Vermont customers with purchases over $500 indicating that use tax may be due. A copy must also be filed with the Vermont Department of Taxes by January 31st each year. Failure to comply could result in a $10 penalty per notice failed to be filed.

Legislation has also been introduced in Hawaii, Nebraska, Pennsylvania, Washington and Wisconsin with similar reporting requirements.

Concerned About Sales and Use Tax?

With states looking for new sources of revenue, the burden of complying with out of state sales tax remittance or reporting requirements is becoming increasingly complex. It’s likely that over the new few years, we’ll see additional legislation, regulation and court cases that could affect your business.

automating sales tax complianceIf your business sells out of state – regardless of whether you have a physical presence or not, keeping up with tax requirements is very challenging.

It’s possible to automate your sales tax compliance needs, and we suggest that your investigations start with downloading our free report to this end. Simply click here.

Talk to us. The State and Local Tax experts at Freed Maxick can help you navigate these tricky waters in a manner that ensures compliance and the lowest possible tax burdens.

Call Jeannette M. Marchant, CPA Tax Manager, at 716.847.2651, or click here to start a connection.

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