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States Follow South Dakota: A By-State Guide on Economic Nexus

author photo of Sylvia F. Dion

If you caught my post published earlier today where I provide a recap of the U.S. Supreme Court’s decision in Wayfair, my predictions on the rapidly changing sales tax landscape and recent Congressional efforts to bring some uniformity to this chaos, you’re already aware that of August 1st more than 25 states have adopted an economic nexus standard for sales tax. While some states have adopted economic nexus through legislation, others through updated/new economic nexus regulations, and yet others have adopted economic nexus through administrative policy - excluding their legislatures from the policy making process and circumventing the formal regulation promulgation process.

I first blogged about economic nexus when states, such as South Dakota, decided it was time to blatantly challenge Quill by enacting economic nexus laws. When I wrote that first post, “Economic Nexus: The ‘New Normal” or the Demise of Quill?,” I predicted these constitutionally questionable laws might lead to the demise of Quill and could indeed become the “new normal.” But now that this has occurred, I have to say it’s mind-boggling how rapidly the economic nexus train is charging along. States are reacting at warp speed!  Yep, economic nexus IS the “new normal."  Be aware that these economic nexus laws have implications not only for remote online retailers but for all types of businesses making remote sales into states in which they have no physical presence but meet the various states’ sales and/or transactions thresholds. To provide an overview on the rapidly evolving economic nexus rules, I've created an economic nexus chart that details each state's provisions (you'll find the full chart below).

Before launching into this economic nexus chart, here are a few important things to note. First, in most states, economic nexus is based on a sales OR transactions threshold - if either is met, economic nexus is triggered. Additionally, some states base their economic sales threshold on taxable sales, while others mention gross sales and other explicitly state that both taxable and exempt sales are to be considered in determining if the sales threshold has been exceeded. Also note that many of the states that have enacted economic nexus have done so as part of comprehensive legislation which also includes Notification & Reporting, Marketplace Facilitator or other provisions (I mention which have enacted comprehensive laws in the chart and footnotes). Also, as you go through the chart, note that all footnotes referenced can be found at the bottom of the chart (you'll find more information in these footnotes). Finally, I’ve included numerous links throughout the chart – the legislation (bill number), state tax agency press releases, FAQs, updates, etc. My goal in creating this chart was to provide a solid, go-to resource for practitioners and businesses (I also plan is to update this same blog post as new developments occur - and on that note, I encourage you to bookmark this blog post webpage).

So without further a-do, following is a chart of the Economic Nexus states as of August 10, 2018 

State and Enacting Legislation or Regulation

Sales Threshold [FN1]

Transactions Threshold [FN2]

Effective Date

State Press Releases, Notices, Updates

Other Criteria and/or Additional Comments

Alabama

AL Reg 810-6-2-.90.03

Sales of TPP of more than $250,000 in prior calendar year

No transaction threshold - but other criteria must be met (see Comment)

Oct 1 2018 [FN3]

Alabama DOR Press Release

Seller must also engage in or conduct certain other activities in AL in addition to having more than $250,000 in sales. [FN4]

Connecticut

S.B. 417

Retail sales of TPP of $250,000 more in year ending Sept 30, 2018

 

AND 200 or more separate retail sales in the year ending Sept 30, 2018 (other criteria must also be met – see Comment)

Dec 1 2018

See Connecticut Notice SN 2018 (5) (pages 2 - 4)

In addition to meeting both the sales and transaction thresholds, seller must also regularly & systematically solicit sales via mail, telephone, computer, internet or other communication system. [FN5]

Georgia

H.B. 61

Retail sales of TPP of more than $250,000 in prior or current calendar year [FN6]

OR 200 or more separate retail sales of TPP

Jan 1 2019

 

H.B. 61 also includes a Notification & Reporting provision.

Hawaii

S.B. 2514

Gross income from sales of TPP, intangibles or services of $100,000 or more in prior or current calendar year

 

OR 200 or more separate transactions for the sale of goods, intangibles or services

July 1 2018

Hawaii Dept of Taxation Announcement 2018-10 - Amended

The original version of Announcement 2018-10 would have imposed retroactive application of the law. [FN7]

Illinois

H.B. 3342

Gross receipts from sales of TPP of $100,000 or more in prior or current calendar year

 

OR 200 or more separate transactions

Oct 1 2018

 

Seller must determine at the end of each calendar quarter whether they exceeded either economic nexus thresholds in the prior 12-month period.

Indiana

H.B. 1129

Gross revenue from sales of TPP or services of more than $100,000 in prior or current calendar year [FN8]

 

OR 200 or more separate transactions

Oct 1 2018 [FN9]

Indiana DOR webpage on SD v. Wayfair for FAQs and updates, also see this IN Tax Bulletin (July 27 2018)

Indiana’s law uses the same economic thresholds as South Dakota’s law.

Iowa

S.F. 2417

Gross revenues from sales of goods or services of $100,000 or more in prior or current calendar year

OR 200 or more separate transactions

Jan 1 2019

See Iowa DOR Bulletin for more information

Iowa's law uses similar thresholds to South Dakota's law. S.F. 2417 also includes a Notification & Reporting provision.

Kentucky

H.B. 487

Sales of TPP or digital property of more than $100,000 in prior or current calendar year [FN10]

 

OR 200 or more separate transactions

Oct 1 2018

See this KY Notice re Wayfair decision and Oct 1st effective date, Also this KY Remote Seller FAQ.

Kentucky’s law uses the same economic thresholds as South Dakota’s law.

Louisiana

H.B. 17

Sales of TPP, digital products or services of more than $100,000 in prior or current calendar year

OR 200 or more separate transactions

Jan 1 2019

Remote Seller's Information Bulletin No. 18-001 (Aug 10, 2018)

Louisiana’s law uses the same economic thresholds as South Dakota’s law. The Louisiana law also established the Louisiana Sales and Use Tax Commission for Remote Sellers. 

Maine

L.D. 1405

Sales of TPP or services of more than $100,000 in prior or current calendar [FN11]

OR 200 or more separate transactions

July 1, 2018 [FN12]

Maine Revenue Services Wayfair webpageRemote Sellers webpage and Tax Alert (Aug 2018)

Maines’ law uses the same economic thresholds as South Dakota’s law.

Massachusetts

Reg. 830 CMR 64H.1.7 

Sales into MA of $500,000 or more in prior or current taxable year [FN13]

 

AND 100 or more separate transactions

Oct 1 2017

Massachusetts DOR press release (June 22 2018)

In its 6/22/2018 press release, the Massachusetts DOR indicated that its economic nexus regulation continues to apply and is not impacted by the Wayfair decision.

Michigan

MI RAB 2018-6

 

Taxable or non-taxable sales into MD of more than $100,000 in prior or current calendar year

OR 200 or more separate transactions

Oct 1 2018

MI Notice to Remote Sellers Re Sales Tax and Wayfair, MI Revenue Administrative Bulletin (RAB) 2018-6

Michigan's directive uses same thresholds as South Dakota’s law. Economic nexus adopted by Dept of Treas administrative bulletin, not through enacted legislation.

Minnesota

H.F. 1

Retail sales into MN of more than $100,000 in 10 or more transactions in a 12 consecutive month period.

OR 100 or more separate retail transactions

Oct 1 2018

See MN DOR Press Release (July 27 2018), Remote Seller Webpage, and Remote Seller FAQ

Minnesota’s threshold includes both and “AND” and an “OR” threshold. [FN14]

Mississippi

Rule 35.4.03.09

Sales into Mississippi of more than $250,000 in prior or current calendar year

 

None - but other criteria must also be met (see Comment)

Sept 1 2018 [FN 15]

See MS Sales and Use Tax Guidance for Online Sellers (updated Aug 6, 2018)

In addition to meeting both the sales threshold, a remote seller must also “purposefully or systematically” exploit the Mississippi market.

Nebraska

No Regulation or Legislation – per Department Policy

 

Nebraska sales of more than $250,000

OR 200 or more separate transactions (other criteria must also be met)

Jan 1 2019

Nebraska Wayfair Information webpage, News Release, and FAQ

Although physical presence no longer required, a remote seller must also be engaged in business in Nebraska as defined under Neb. Rev. Stat. § 77-2701.13.

North Carolina

N.C. Directive # SD-18-6

 

Gross sales of $100,000 or more sourced to North Carolina in prior or current calendar year

OR 200 or more separate transactions

Nov 1 2018

North Carolina DOR webpage announcing new directive.

North Carolina’s directive uses same thresholds as South Dakota’s law. Economic nexus adopted by DOR policy statement, not through enacted legislation.

North Dakota

SB 2298

Sales of TPP or other taxable items of $100,000 or more in prior or current calendar year

OR 200 or more separate transactions

Oct 1 2018

North Dakota webpage on Remote Seller Sales Tax, North Dakota press release announcing Oct 1 2018 enforcement date

North Dakotas’ law uses same thresholds as South Dakota’s law. Also see North Dakota Tax Commissioner statement on Wayfair decision 

Ohio

H.B. 49 [FN16]

Gross receipts exceed of more than $500,000 in the prior or current calendar year

None - but other criteria must be met (see Comment)

Jan 1 2018

 

In addition to meeting the gross receipts threshold, a remote seller must use in-state software (including “cookies”) or a "CDN" [FN17] in Ohio to be subject to Ohio’s economic nexus law.

Oklahoma

H.B. 1019

Sales of TPP of $10,000 or more during the prior 12- month period

None - but see Comment

Apr 10 2018

 

A remote seller that meets the $10,000 threshold must either register to collect or comply with the OK notification & reporting law. [FN18]

 

 

Pennsylvania

H.B. 542

Sales of TP of $10,000 or more during the prior 12- month period

None - but see Comment

Apr 1 2018

 

Remote sellers [FN19] with aggregate sales of $10,000 or more in the prior 12-month period must elect to collect and remit PA sales tax or comply with the notice & reporting requirements.

Rhode Island

HB 5175

 

Gross revenue from the sale of TPP, software [FN20] or has taxable services of $100,000 or more 

 

OR 200 or more separate transactions

Aug 17 2017

Rhode Island DOR FAQs for Remote Sellers following Wayfair Decision.

Non-collecting retailers must either register and collect and remit sales and use tax on all RI taxable sales or comply with notification & reporting provisions. [FN21]

South Dakota

S.B. 106

Sales of TPP or services of more than $100,000 in prior or current calendar  

 

OR 200 or more separate transactions

Pending (likely to be Oct 1 2018) [FN22]

South Dakota DOR’s press release and webpage for remote sellers

The first state in the country to enact economic nexus for sales tax, the law in question in South Dakota v. Wayfair.  Although the U.S. Supreme Court ruled in favor of South Dakota, a current injuncation against enforcement means the South Dakota DOR cannot yet enforce its law. [See FN22]

Tennessee

Rule 1320-06-01-.129 (Rule 129)

Sales of TPP or services of more than $500,000 during any calendar year

None, but other criteria must be met (see Comment)

Pending [FN23]

 

Seller must also engage in regular or systematic solicitation of TN consumers through any means in addition to having more than $500K in sales.

Utah,

S.B. 2001

Sales of TPP, electronically transferred products or services of more than $100,000 in prior or current calendar year.

200 or more separate transactions

Jan 1 2019

 

Utah’s law uses the same economic thresholds as South Dakota’s law.

Vermont

H.B. 873

Sales of $100,000 or more in prior 12-month period

200 or more separate transactions (but other criteria must also be met – see Comment)

July 1 2018 [FN24]

Vermont Dept of Taxes Wayfair webpage.

Seller must also engage in regular, systematic, or seasonal solicitation of sales of TPP (including via internet, etc.) in addition to meeting one of the economic thresholds.

Washington

H.B. 2163

Threshold One: Retail sales of TPP of $100,000 or more during the prior 12- month period [FN25]

Threshold Two: Retail sales of TPP of $10,000 or more during the prior 12- month period

Threshold One: 200 or more separate transaction [FN25]

Threshold Two: No transaction threshold under Threshold Two

Oct 1 2018 (Threshold One) [FN25]

Jan 1 2018 (Threshold Two)

Washington DOR’s Marketplace Fairness webpage [FN25]

In August 2018, the Washington DOR updated its Marketplace Fairness webpage and added a NEW set of economic nexus thresholds that become effective on Oct 1, 2018. Therefore, there are now two separate sets of economic nexus thresholds that apply in Washington. See [FN25] for a detailed explanation. 

Regulation to be adopted, announced via Wisconsin DOR Notice

 

Sales of more than $100,000 in prior or current calendar

 

200 or more separate transactions

Oct 1 2018

Wisconsin DOR press release, webpage on Remote Sellers and Wayfair, and FAQ.

On July 5 2018, the WI DOR announced it will issue a rule (regulation) that will be consistent with the U.S. Supreme Court’s decision in South Dakota v. Wayfair.

Wyoming

H.B. 119

Gross revenue from sales of TPP, admissions or services of more than $100,000 in prior or current year.

200 or more separate transactions

Pending [FN26]

Also see Wyoming’s statement on the Wayfair at this webpage.

Wyoming’s law uses the same economic thresholds as South Dakota’s law.

 

[1] IMPORTANT REGARDING SALES THRESHOLDS: When reviewing this chart, note that in some states the sales threshold is the specified sales amount OR MORE (e.g., CT, GA); while in others it is MORE THAN the specified sales amount (e.g., AL). Also, note that in many states, the law makes no distinction between taxable and non-taxable sales. Therefore, an out-of-state seller whose sales into an economic nexus state are largely exempt sales (such as “sales for resale”) may still exceed the sales or transaction thresholds even if many of their sales would not be subject to sales tax.

[2] IMPORTANT REGARDING TRANSACTIONS THRESHOLDS: Note that in many states, if EITHER of the thresholds is met, the seller would have economic nexus (most of the states above follow this "OR" approach). But in other states, BOTH thresholds must be met for the seller to be subject to the state’s economic nexus law (e.g., CT, MA).

[3] Alabama’s economic nexus regulation had an original effective date of Jan 1, 2016, however the regulation could not be enforced until Wayfair was decided. On July 3, 2018, the Alabama DOR announced its regulation would become effective on Oct 1, 2018 (press release to Alabama’s notice is linked in the chart above). The Alabama Notice also indicates that remote sellers who can demonstrate that a marketplace facilitator is collecting and remitting Simplified Seller’s Use Tax (SSUT) or sales tax on their Alabama sales will be relieved of complying with the remote seller requirements. On July 20, 2018, Alabama issued a NEW regulation (AL Reg. 810-6-2-.90.04 – Requirements for Certain Marketplace Facilitators and Marketplace Sellers).

[4] An out-of-state seller must also engage in or conduct one of more of the activities in addition to exceeding the sales threshold: (1) occupying, using a facility directly or indirectly (though sub or agent); (2) employing and/ or engaging a sales rep, agent, solicitor, installer; (3) engaging in substantial & recurring solicitation of orders for tangible personal property if the seller benefits from banking, financing, debt collection, telecommunication or marketing activities in Alabama or from authorized installation, servicing or repair facilities located in Alabama.

[5] Connecticut S.B. 417 is a very comprehensive bill which also includes a related party, marketplace facilitator and notification & reporting provision.

[6] Georgia’s law applies to goods delivered both physically (e.g., product shipped via common carrier into the state) or delivered electronically (e.g., software, e-books)

[7] The amended Announcement overrides Hawaii's initial Announcement (issued 6/27/2018) which said some taxpayers might owe the Hawaii General Excise Tax for the first six months of 2018.

[8] Indiana’s law applies to goods delivered both physically (e.g., product shipped via common carrier into the state) or electronically (e.g., software, e-books)

[9] Although the original effective date of Indiana’s law was July 1, 2017, on July 27, 2018, the Indiana DOR issued an Indiana Revenue Tax Bulletin noting that the IN DOR will start to enforce its economic nexus law prospectively on October 1, 2018.

[10] Includes digital property delivered or transferred electronically.

[11] Maine’s law applies to goods delivered both physically (e.g., product shipped via common carrier into the state) or electronically/digitally (e.g., software, e-books) and taxable services.

[12] Although the original effective date of Maine’s law was Oct 1, 2017, Maine Revenue Services has stated on a newly posted webpage, that its law will be "enforced for sales occurring on or after July 1, 2018, the first monthly filing period after the date of the Wayfair decision."

[13] Also see our article at SalesTaxSupport.com, "Massachusetts Expands Sales Tax Nexus Policy for Internet Vendors" for a more indepth discussion of Massachusetts' economic nexus policy.  Additionally, in early 2018, Amazon turned over specific, identifying information to the Massachusetts DOR in response to a valid and binding legal demand from the Massachusetts DOR. See our article at SalesTaxSupport.com: “Amazon Exposes FBA Sellers in Massachusetts: 5 Key Considerations” for more on this development.

[14] Minnesota’s “small seller exception” is unique in that it includes both an “AND” and an “OR” transactions requirement. If the sales threshold of more than $100,000 in retail sales is met, those sales must have been completed in 10 or retail transactions (this is the “AND” requirement). Thus, as an example, a remote seller who makes 5 Minnesota retail sales in a consecutive 12-month period which total more than $100K would not be subject to the economic nexus. Separate from the sales threshold, a remote seller who makes 100 or more retail sales into Minnesota would also economic nexus regardless of whether they met the sales threshold (this is the “OR” requirement).

[15] Even though Mississippi's economic nexus rule had an original effective date of Dec 1, 2017, on August 6, 2018, the Mississippi DOR updated administrative notice 35.4.03.09, "Sales and Use Tax Guidance for Online Sellers." In this notice, the DOR indicated it was not actively enforcing its rule prior to the Supreme Court’s Wayfair decision and that DOR will allow online sellers to begin collection of Mississippi use tax for sales made on or after September 1, 2018 when such sellers register to collect Mississippi tax by August 31, 2018. 

[16] Ohio H.B. 49 is a very comprehensive bill. The economic nexus provisions can be found at pages 2,305 – 2,307.

[17] A CDN is a “content delivery network” such as a system of distributed services that delivers web sites and other web content to Ohio users.

[18] Several states have enacted laws which give the out-of-state seller (that exceeds the sales threshold) a choice of either registering to collect, report and remit sales tax OR comply with the state’s notification & reporting provision. Even though the notification & reporting provisions do not require an on-out-state seller to register and remit sales tax, the notification & reporting laws impose added burdens on the out-of-state seller making it almost easier for the seller to register, collect and remit.

[19] Pennsylvania’s law also applies to marketplace facilitators and “referrers.” Effective April 1, 2018, Amazon began collecting, remitting and reporting Pennsylvania sales tax on behalf of its third-party sellers in order for Amazon to comply with Pennsylvania’s new marketplace facilitator law.

[20] Applies to pre-written software delivered via electronically or by load and leave.

[21] Rhode Island’s law is a very comprehensive bill which includes economic, affiliate, click-through, warehouse, and marketplace provider nexus provisions.

[22] Maine’s law applies to goods delivered both physically (e.g., product shipped via common carrier into the state) or delivered electronically/digitally (e.g., software, e-books) and taxable services

[22] South Dakota’s law had an original effective date of May 1, 2016; however, the South Dakota DOR has been precluded from enforcing its law due to the Wayfair litigation. Even though the U.S. Supreme Court ruled in favor of South Dakota, the injunction (against enforcement) that was placed on the law by a South Dakota Circuit Court is still in place which means the South Dakota law cannot be enforced until the injunction is lifted. On August 7th, Gov Daugaard issued a press release annoucing a Special Legislative Session which will be held on Sept 12, 2013 to address an implemention date. The South Dakota law will only be enforced prospectively. On August 9th, the South Dakota Supreme Court remanded Wayfair back to the Circuit Court for further proceedings and/or to dissolve the injunction

[23] Tennessee’s law was originally effective on July 1, 2017; however, the Tennessee DOR cannot enforce its law due to litigation and until the Wayfair decision was decided.

[24] Vermont’s law was originally enacted in 2016 and had a contingent effective date which would be the later of July 1, 2017 or the date the physical presence requirement in Quill was abolished. The Vermont Department of Taxes has announced in its Wayfair webpage that its economic nexus provisions became effective July 1, 2018 and out-of-state vendors who meet either economic nexus threshold should register for a Vermont sales tax license.

[25] In August 2018, the Washington DOR updated its Marketplace Fairness webpage and added a NEW set of economic thresholds that become effective on Oct 1, 2018. Under these NEW guidelines (which Washington refers to as "Threshold One"), a remote seller making either $100,000 or more in sales to or 200 transactions with Washington purchasers must register their business and collect/submit retail sales/use tax on those sales. Threshold One only applies to remote sellers and includes remote sellers whose Washington sales are made through a marketplace facilitator.  Under "Threshold Two", which are the original economic nexus guidelines enacted as part of H.B. 2163 and which went into effect on Jan 1, 2018, remote sellers and marketplace facilitators with aggregate retail sales of $10,000 or more in the prior 12-month period must either collect and remit WA sales tax or comply with notice and reporting requirements.

[26] Wyoming’s law had an original effective date of July 1, 2017 however, due to pending litigation, the Wyoming law cannot yet be enforced.

*****************

  • If you're a foreign (non-U.S.) seller, please see my new post published "Wayfair & Economic Nexus for Foreign Sellers: Key Sales Tax Questions" which includes Questions and Answers written specifically to address the concerns and questions many foreign sellers may have. The post is written in an FAQ format and contains helpful guidance not only for foreign sellers, but U.S. sellers as well.
  • I'll be updating this blog post as updates occur - please consider bookmarking this blog post webpage for easy reference.
  • As noted above and in the footnotes to the chart, many states have enacted legislation which includes Notification & Reporting, Marketplace Facilitator and other provisions. I'll be continuing this series with additional blog articles and more charts which focus on these additional provisions as well as blog posts on what impacted sellers need to consider in this "new era."
  • Finally, if you have questions, please feel free to post a comment below. And, if you're uncertain as to how economic nexus impacts your business, please feel free to contact me via the link in my Author's Box below, via the "Consultation Request" box below, or via my firm's webpage here at SalesTaxSupport.com.

About the Author: Sylvia Dion is the Founder and Managing Partner of PrietoDion Consulting Partners LLC, a SALT advisory firm which provides SALT services to businesses in the U.S. and throughout Europe, Canada, Latin American and Australia. Since 2011 Sylvia has served as a contributor to the SalesTaxSupport blogs and currently blogs on Internet Sales Tax, U.S. Sales Tax for Foreign Sellers, and Massachusetts Sales Tax. Sylvia has written articles for State Tax Notes, Bloomberg BNA and other premier tax journals. You can follow Sylvia on twitter and on Google+ and can contact Sylvia via e-mail at sylviadion@prietodiontax.com.

Comments or questions may be submitted by using the on-page "Comment" feature, subject to disclaimer at bottom of page. Other contact options (and Consultation Requests) are also available on Sylvia's associated Firm Profile page.

Other recent “Internet Tax / E-Commerce” posts by Sylvia F. Dion, CPA:

NOTE: All blog content, comments, and participation subject to disclaimer at bottom of page.

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