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Written by: Steve Estelle
The May 2nd House-Passed Budget (Sub H.B. 49) contains a provision that requires out-of-state sellers to register and collect Ohio sales tax regardless of whether the seller has constitutionally required in-state physical presence. The provision applies to out-of-state sellers who, in the current or previous year, made more than $100,000 in Ohio sales or had 200 or more Ohio transactions.
If enacted, it would take effect January 1, 2018, and Ohio would join the small but growing number of states that have taken legislative or administrative action to require remote sellers to collect the state’s sales tax without regard to whether Quill’s physical presence standard is met. Indiana was the latest state to take action: H.B. 1129, signed by gov. April 28, 2017 (H.B. 1129’s thresholds are the same as those above). Alabama, Massachusetts, North Dakota, South Dakota, Tennessee, Vermont, and Wyoming have also established bright-line sales tax nexus standards.
The effort to challenge Quill’s physical presence standard began primarily with Colorado’s enactment of H.B. 10-1193, which imposed notice and reporting requirement on non-collecting remote sellers without physical presence. Litigation ensued, which eventually led to a U.S. Supreme Court decision in March 2015, although it did not address the core constitutional issue. In a concurring opinion, however, Justice Kennedy invited “the legal system to find an appropriate case for this Court to reexamine Quill . . .”
Thereafter, Alabama adopted a regulation and South Dakota enacted legislation that went beyond Colorado’s notice and reporting law to require registration and collection. There too, litigation ensued and enforcement of both states’ requirements are currently enjoined. The South Dakota litigation appears to be ahead of the Alabama litigation. A notice of appeal was filed with the South Dakota Supreme Court on March 8, 2017.
The Colorado notice and reporting requirements are scheduled to be enforced starting July 1, 2017.
We will keep you updated on further developments as they become available. Please contact Steve in the meantime with any questions on how this may affect you.
Whalen & Company, CPAs is pleased to announce the addition of Steve Estelle to their growing team. He has joined the team as Senior Consultant, Specialty Tax Services.
In mid-March, the Ohio Tax Department assessed Commercial Activity Tax on reimbursed costs a law firm allegedly fronted on behalf of clients, but it didn’t assess tax on all such costs. To find out why, click here.
