New York and Pennsylvania enact sales tax Nexus rules pursuant to Wayfair

As many taxpayers now know, the landmark U.S. Supreme Court decision in South Dakota v. Wayfair, Inc. dramatically changed the sales tax landscape.

As a result of the decision, South Dakota began enforcing its statute, which required remote sellers with at least $100,000 of sales or 200 or more separate transactions into the state to register and collect sales tax. Although the Wayfair decision was rendered June 21, 2018, South Dakota did not begin enforcing its statute until November 1, 2018.

Since the Wayfair decision, approximately 30 states have enacted and started to enforce similar economic nexus statutes. New York has been silent on this issue until January 15, 2019, when it released Notice N-19-1, Notice Regarding Sales Tax Registration Requirement for Businesses with No Physical Presence in New York State. Pursuant to New York Tax Law § 1101(b)(8)(i)(E), New York has historically defined a vendor as someone “who regularly or systematically solicits business in New York State by any means and by reason thereof makes taxable sales of tangible personal property to persons in the state.” Notice N-19-1 indicates that this definition will be interpreted to include a business with no physical presence in the state, but which had at least $300,000 in sales or 100 or more transactions of tangible personal property into the state in the immediately preceding four sales tax quarters. The sales tax quarters are March 1 – May 31, June 1 – August 31, September 1 – November 30, and December 1 – February 28/29.

What is unclear regarding New York’s notice is whether the state will retroactively enforce this determination to June 21, 2018. Thus far, states adopting similar economic nexus rules have not engaged in retroactive enforcement, consistent with the Supreme Court’s finding that the lack of retroactive application was a key factor in determining that South Dakota’s law was not an undue burden.

On January 11, 2019, Pennsylvania also updated their post-Wayfair guidance. Sales and Use Tax Bulletin 2019-01 stated that economic nexus is triggered when a remote seller or marketplace facilitator has more than $100,000 in gross sales in the state during the previous 12 months. Prior to the bulletin, Pennsylvania gave businesses the choice of either collecting sales tax or complying with certain reporting requirements if they had at least $10,000 of sales into the state.

Mazars USA Insight:
Sales tax nexus has become a very fluid topic lately, and states are regularly coming out with new and/or updated guidance. It is important for businesses to understand their state sales tax footprint in order to be properly prepared for sales tax collection and filing obligations.

Please contact your Mazars USA LLP professional for additional information.

Published on: January 21, 2019

The information provided here is for general guidance only, and does not constitute the provision of tax advice, accounting services, investment advice, legal advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisers.