Uh-Oh…Butch Clicked On It

In late March 2018, Idaho Governor, Butch Otter officially signed into law a house bill that will require all out of state or remote retailers to collect and remit sales and use tax. This is only applicable to out of state retails that generate over $10,000 dollars through their Idaho affiliates. Idaho is one of the few states that has enacted legislation related to the establishment of nexus through a parent entity or affiliates.

Do you or any of your affiliates do business in Idaho? If yes, you might have a filing requirement. Contact our state and local tax team for more information.

 

California Targeting Remote Sellers

California has contacted more than 2,500 out-of-state retailers to notify them that they may owe sales tax due to the presence of products in California warehouses.  A remote seller owning products in a California warehouse creates a physical presence in California and therefore sales tax nexus.  The most common example is holding inventory in an Amazon warehouse.  If contacted by the State of California the remote seller will be required to remit sales tax on all sales into California from the time this nexus was created.  Any seller who believe they are in this situation should contact Eide Bailly’s State and Local Tax Team to discuss options to minimize the tax, penalties and interest. Once the state contacts the retailer the options to mitigate the exposure are limited. 

 

Summary Judgment Granted to a Limited Partnership in New Jersey

A New Jersey Tax Court recently granted summary judgment to a nonresident limited partnership. One of the partners had originally consented to being taxed in New Jersey, and later amended the returns and requested a refund of taxes paid. This was based on an assertion of no nexus. The Division responded by denying the request and assessing additional tax for the partner that had not consented to be taxed in New Jersey. Contrary to the Division’s assertion, the court held that the refund claim does not constructively revoke the nonresident partner’s election to be exempt. The denial of the refund claim is still being litigated.

For more information on nexus and other similar matters, contact our State and Local Tax team.

 

Indiana Department of Revenue Assesses Additional Income Tax on Gambling Couple

An Indiana married couple was recently assessed additional tax when the Indiana Department of Revenue determined that they did not qualify as professional gamblers. The State’s assessment is a result of a Federal adjustment. Professional gamblers report their winnings, losses, and expenses on Schedule C, which typically results in a lower income tax liability. The IRS’s denial of the taxpayer’s protest of their categorization as casual gamblers was adopted by the State without further analysis.

For more information on this and other income taxation rules, contact your state and local tax professional.

Virginia Ruling Explains Nexus for Inventory Stored In-State

A Virginia Ruling of the Commissioner recently explained how the Virginia Department of Taxation would interpret and enforce a new nexus law passed this last year. Remote sellers that have inventory stored in a third party warehouse located in the State are deemed to be dealers in the State. This law appears to be intended to apply to remote sellers using Amazon fulfillment services or the like.

 

Other states may have similar cases in the works; contact your state and local tax professional with questions or for more information.

Colorado Publishes Permanent Rule for Notice and Reporting Requirements

On November 25, 2017 Colorado published a permanent rule in regard to its Notice and Reporting requirement for out-of-state retailers. The permanent rule includes a few minor changes and clarifications from the previously announced requirements.

Summary of Rule

Effective July 1, 2017, Colorado required an out-of-state retailer whose total gross sales into Colorado are $100,000 or more, and who does not collect Colorado sales tax, to give a transactional notice to their Colorado purchasers that sales tax has not been collected and that use tax may be owed. Additionally, if any of their Colorado purchasers purchased more than $500 worth of products in a calendar year, then a Purchase Summary must be mailed to that purchaser and a corresponding Informational Report given to the Colorado Department of Revenue.

Noteworthy Changes with Permanent Rule

  1. Colorado has recognized that some out-of-state retailers making online sales utilize third party payment processing vendors. Previously, to give a transactional notice, an online retailer would be required to display a transactional notice on the “check out” page. However, for retailers that use a third party payment processor, they may not have control of the content that is on the “check out” page. Therefore, those retailers can now give the transactional notice on the “product page” of their website.
  2. For retailers that utilize subscription type sales such as a “Jelly of the Month Club,” Colorado has clarified the notice requirements. For subscription type sales, a transactional notice is only required when the purchaser enrolls in the subscription or renews it.
  3. The maximum penalty limitation given to out-of-state retailers for the first year that they are required to comply, has been removed. Now, if an out-of-state retailer fails to comply with Colorado’s Notice and Reporting rules they will have to show that they “reasonably had no knowledge” of the requirement, to be subject to a maximum penalty.
  4. Unlike Washington, Colorado does not directly impose a duty to either collect sales tax or comply with their Notice and Reporting requirement on marketplace providers, such as Ebay. But, sellers (with gross sales of $100,000 or more), that utilize online marketplaces, are still required to comply with Colorado’s Notice and Reporting requirement regardless of their use of a marketplace provider platform. However, the permanent rule allows marketplace providers to satisfy the Notice and Reporting requirements on behalf of the sellers.

Transactional Notice

Colorado has indicated that online retailers must include certain elements in the transactional notice. Sample language would include the following:

[Name of retailer] does not collect Colorado sales or use tax. This purchase is not exempt from Colorado sales or use tax merely because it is made over the internet or by other remote means. The State of Colorado requires purchasers to (A) report all purchases that are taxable in Colorado and for which no tax was collected by the retailer and (B) pay tax on those purchases.

The permanent rule will be effective on January 1, 2018.

If your company makes sales into Colorado without collecting sales tax, contact Eide Bailly’s State and Local Tax Team for assistance with how to comply with Colorado’s Notice and Reporting requirements.