RTOHQ: The Magazine, Winter 2018

Winter 2018 31 laws that require vendors wherever located to collect and remit sales tax if they have sales of 250000 or more annually in the state Tennessee has a similar law with a 500000 threshold THE COOKIE NEXUS STANDARD Ohio adopted this standard for taxing remote sellers effective January 1 of this year The Cookie Nexus requirement applies to remote sellers if they use in state software for example allowing customers to download apps from in state software companies and placing cookies on in state residents web browsers or having relationships with in state content distribution networks or using instate marketplace facilitators or delivery companies The threshold for coverage is 500000 in annual sales and at least 100 transactions during the previous twelve months Massachusetts is considering adopting a similar standard STATES THAT HAVE FOLLOWED SOUTH DAKOTA Six states adopted the South Dakota tax scheme before the Wayfair case was decided Indiana Maine North Dakota Vermont and Wyoming Presumably they have won their bet on how to tax remote sellers and need not change anything WHAT HAPPENS NEXT There will likely be challenges to states that have adopted tax schemes significantly different from the South Dakota approach At the same time states will likely move to bring their tax laws more in line with the South Dakota model since it has the Supreme Courts blessing There are already several bills in Congress attempting to insure that state taxes do not unfairly burden interstate commerce do not discriminate against remote sellers and do not allow states to tax more than their fair share of interstate commerce The Business Activity Tax Simplification Act BATSA Digital Goods and Services Tax Fairness Act and the Remote Transactions Parity Act RTPA The level of vitriol is such in D C that the chances of any of these bills moving is slight As you might imagine fair like beauty is in the eye of the beholder and in this case state governments There could be some nasty internecine tax battles among the states before this issue gets finally resolved While the Wayfair ruling only addressed sales tax matters South Dakota does impose an income tax it is not beyond the realm of possibility this ruling could pour over into income tax nexus standards for other states Traditionally states have used the UDITPA 3 factor formula sales payroll property Now more states are moving towards market based sourcing location of the benefit of sales service WHAT ABOUT INTERNET RTO DEALERS RTO dealers doing business on the Internet with out ofstate customers have always been more vulnerable to allegations that they should be collecting and remitting sales tax from those out of state customers to the states where the customers live because they do have a physical presence in the state to wit the rental property that their customers are using and that the rental dealers own and have listed on their balance sheets as assets Granted shipping one TV to some out of state customer may not trigger the tax folks to investigate but shipping 100 or 1000 or more might There are some Internet RTO companies who have been collecting and remitting sales tax on all of their transactions for years others of course have not been doing so and there have been no legal repercussions to date After Wayfair the whole issue of sales tax and Internet transactions is going to get increased scrutiny Brick and mortar retailers including RTO dealers are doubtless cheering the decision Internet dealers should be looking around for software programs that will tell them what the applicable tax rate is based upon where their customers live because the tax man is assuredly coming Before long Internet dealers will have to start collecting taxes on all of their transactions The immediate challenge is to figure out how much tax to charge The software is out there Go get some Here is a website with eighteen tax software vendors to investigate goo gl i3p8E9 Ed Winn III is APROs general counsel His email address is edwinn@ mwvmlaw com Alabama Colorado Kentucky Louisiana Oklahoma Pennsylvania Rhode Island Tennessee Vermont Washington State Arkansas California Colorado Connecticut Georgia Illinois Kansas Louisiana Michigan Missouri Minnesota New York North Carolina Nevada New Jersey Ohio Pennsylvania Rhode Island Tennessee Vermont and Washington The Click Through States The Notice and Reporting States Note that some states have enacted versions of both kinds of regulation