States Start to Enforce Online Sales Tax Laws, Look to Tax Marketplace Providers

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Since the Supreme Court’s landmark decision in South Dakota v. Wayfair, more than half of the states with sales tax have rapidly taken steps to begin collecting sales tax from out-of-state retailers, with 24 of the 45 states with a sales tax in various stages of requiring out-of-state retailers to collect.

As we previously reported, in Wayfair, the Supreme court ruled that internet retailers can be required to collect sales and use tax in states in which they lack a physical presence, overturning 26 years of precedent barring states from taxing out-of-state sellers.

Some states, like Massachusetts, are already enforcing laws they had on the books, while others will start on October 1, the beginning of the fiscal year for many states, or January 1 .  A number of states are still in the process of formulating their respective remote collection laws, while others are delaying enactment to provide notice to retailers.

One issue being addressed is the new requirement that “marketplace providers,” which offer third-party vendors a platform on which to sell goods (e.g. Amazon, Ebay, and Etsy), will also need to begin collecting and remitting tax on those facilitated sales.

While Amazon and others have been collecting and remitting taxes on their own transactions, marketplace provider laws require them to also collect tax on the sales they facilitate for millions of small vendors using their platforms.

Alabama, Arizona, Connecticut, Iowa, Massachusetts, Minnesota, Oklahoma, Pennsylvania, Rhode Island, and Washington have already enacted these laws. Additional states are in the process of either enacting such requirements or imposing them administratively.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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