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October 1, 2019 Economic Nexus Enforcement

by DMADevelopers DMADevelopers | Oct 14, 2019
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Five states (Alabama, Arizona, Kansas, Tennessee, and Texas) will be enforcing new economic nexus thresholds on October 1, 2019. Additionally, two states (Massachusetts and Minnesota) will be altering their existing thresholds. Also, Florida has a newly filed bill pending.

Alabama

Effective October 1, 2019, an out-of-state seller with no physical presence in Alabama is required to collect and remit Alabama sellers’ use tax through the Simplified Sellers Use Tax (SSUT) program if total retail sales (taxable and nontaxable) into Alabama for the previous calendar year are above $250,000.

The SSUT tax rate is a flat 8% rate (with a 2% discount applying to taxes collected and remitted up to $400,000). The SSUT must be applied for through the AL DOR. Out-of-state sellers may also choose to collect and remit under the existing Alabama state and local tax regime. Note there is no transaction threshold.

Arizona

Arizona is implementing the first stage of its decreasing thresholds in annual gross retail sales or income from online sales into Arizona. 

  • For 2019, the threshold is sales over $200,000.
  • In 2020, this annual threshold will drop to $150,000.
  • In 2021 and beyond, the threshold will drop to $100,000.

Remote sellers and marketplace facilitators that have not been collecting transaction privilege tax (TPT) under current law are to begin filing and paying starting October 1, 2019.

Kansas

Remote sellers who are not already registered with the Kansas Department of Revenue must register and begin collecting and remitting Kansas sales and/or use tax by October 1, 2019. Kansas has no small seller provisions.

Tennessee

Despite having one of the oldest economic nexus provisions, the Tennessee legislature blocked, then delayed, the enforcement of its law until October 1, 2019. The threshold in Tennessee is $500,000 and is calculated to include all retail sales, including exempt retail sales, but should exclude sales for resale.

Texas

The lone star state is also implementing a $500,000 sales threshold (calculated as total Texas revenue from sales into Texas in the preceding 12 calendar months) effective October 1, 2019. There is no separate transaction threshold. Texas is also offering a single local tax rate option for remote sellers. This single local rate is 1.75% for the period between October 1, 2019 and December 31, 2019.

Existing Economic Nexus Amendments

Massachusetts

Massachusetts is dropping its cookie provision (software nexus) and is enforcing the newly lowered economic nexus threshold of $100,000 (sales from transactions completed over the internet). Massachusetts is also following the trend of dropping its separate transaction threshold which had been set at a lower than usual amount of 100 transactions. 

Minnesota

Minnesota is altering its transaction threshold. Since October 1, 2018, the threshold was 100 or more retail sales transactions or 10 or more retail sales that total more than $100,000. Starting October 1, 2019, Minnesota’s small seller exception will require remote sellers to collect and remit sales tax if their total sales over the prior 12-month period total either:

  • 200 or more retail sales shipped to Minnesota or
  • $100,000 or more in retail sales shipped to Minnesota.

A retail sale is one sales transaction. For example, one sale into Minnesota may contain 10 items for one customer. That transaction counts as one retail sale.

Other Developments

Florida

An Economic Nexus bill (SB 126) was pre-filed on August 13th. If passed, it could finally succeed in establishing economic nexus in Florida, potentially leaving Missouri as the last state with sales tax to not enact such a law. As introduced, SB 126 would provide a $100,000 and 200 transaction threshold for compliance beginning July 1, 2020. 

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