"What a way to return to Sales Tax Tuesday after two weeks of covering QuickBooks Desktop 2019." But, to keep you up-to-date about changes resulting from the Supreme Court’s Wayfair decision, we need to let you know that two more states, Indiana and Maryland will begin taxing sales by businesses with substantial economic activity starting on October 1, 2018. This means that now is the time to get ready to handle the requirements of economic nexus which removes the physical presence limitation in regard to taxing remote sales.
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Sales Tax Tuesday 2018 is a joint venture between Insightful Accountant and Avalara, 'the Sales Tax people', it's purpose is to update you on what's new and different in Sales and Use tax since our first year-long Sales Tax Tuesday adventure way back in 2015. But despite our intentions to bring you the results of our informative ‘RV tour’ paying sales tax all long the way, it seems that the news makers and taxing authorities have given us so much more to write about than just ‘what to see,’ ‘where to go,’ and ‘what to eat’ in a state near you, as well as the sales tax specific of that state that will impact you while you are seeing the sights, traveling through, and dining in style.
To keep you in the know we have published several additional articles this year on 'what's happening' as it relates to sales tax.. just like today's article covering these two states that are implementing 'economic nexus' provisions within the next couple of weeks. As such, it is becoming increasing clear that our Sales Tax Tuesday 2018 series will be much more like a Sales Tax Tuesday 2018/2019 series than initially anticipated. Fortunately, the folks at Avalara are hanging and providing supporting content for anything current coming your way.
Economic Nexus
While overall, the tax policies of these two states are almost identical, the specifics of each of these states are somewhat different, so let’s take a look at each state’s provisions.
Indiana and Economic Nexus
Indiana first attempted to enact economic nexus in regard to sales tax with an effective date of July 1, 2018; however, that proviso was enjoined from taking effect due to a legal challenge. On June 21, 2018 the Supreme Court removed the physical presence limitation and the Indiana Department of Revenue (IDOR) almost immediately announced that it would begin enforcement of the state’s economic nexus provisions effective October 1, 2018. All issues related to these provisions have been resolved and so the IDOR is free to undertake enforcement.
Indiana’s existing “economic nexus” law, IC 6-2.5-2-1(c) effective July 1, 2017, provides that a retail merchant that does not have a physical presence in Indiana shall collect the gross retail tax on a retail transaction made in Indiana if certain threshold requirements are met. Those thresholds are:
- Gross revenue from sales into Indiana exceeding $100,000; or
- 200 or more separate transactions into the state.
All outstanding issues related to these provisions were resolved when the American Catalog Mailers Association and NetChoice voluntarily dismissed their complaint on August 27, 2018 against Indiana with the provision that no retroactive enforcement would be undertaken and that the state would continue as a Streamlined Sales and Use Tax state. Accordingly, the IDOR is now free to undertake enforcement as of October 1st.
Remote sellers seeking to comply should register with the Streamlined Sales Tax Registration system at www.streamlinedsalestax.org, or register directly with Indiana through the INBiz online portal at www.inbiz.in.gov.
By the way, the Indiana (IN) state sales tax rate is currently 7%, and because Indiana is a single state tax rate state, there are no local jurisdiction rates to track at present. Within Indiana, the Department of Revenue is responsible for the administration of all sales taxes, more specific information regarding sales taxes (in general) can be found at this official website.
Maryland and Economic Nexus
Maryland’s Comptroller has approved an emergency economic nexus rule similar to the one adopted by South Dakota, Indiana, and multiple other states which provides that vendors with no physical presence in the state must obtain a sales and use tax license, and must collect and remit tax on sales made within Maryland if they have either:
- Gross revenue exceeding $100,000 from the sale of tangible personal property or taxable services delivered in the state; or
- 200 or more separate transactions of tangible personal property or taxable services for delivery into the state.
These requirements become effective October 1, 2018.
Maryland, like Indiana, is also a single state tax rate state, so while the state sales tax rate in Maryland is currently 6%, there are no jurisdictional rates (at present) to be concerned with. There is a 9% rate on alcoholic beverages sold in Maryland.
While many states have a Department of Revenue or a Tax Commission responsible for tax administration, within Maryland, the State Comptroller's Revenue Administration Division, Taxpayer Service Section is responsible for administration of all Sales and Use Tax (along with other Business Tax) provisions of the state. General provisions regarding Sales and Use Taxes maybe found at this official website.
Now, more than ever, merchants will be forced to deal with the increasing complexities of sales tax compliance. Not only will their own local states be regulating strict compliance, but every state in which they make sales to customers will also be out to enforce sales tax collection and remittance. That's why, with the implementation economic nexus and the related taxation, everyone making retail sales will need a sales and use tax expert like Avalara helping them integrate sales and use tax collections and reporting into their overall business framework.
By providing sales tax automation solutions, including tax calculation, exemption certificate management, returns processing and 1099 filing and reporting, Avatax can give you the assurance of compliance without sacrificing productivity so that your sales tax is way less taxing than ever before even with the complexities of economic nexus.