Laws recently passed in Alabama and South Dakota have created rules requiring remote vendors to collect and remit sales and use tax, directly challenging the nexus requirements set forth in Quill v. North Dakota. Quill established the requirement that vendors must have an actual physical presence in a state before they can be required to collect and remit that state’s sales and use tax.
In October, 2015, Alabama enacted Department of Revenue Rule 810-6-2-.90.03. Effective January, 2016, Rule 810-6-2-.90.03 requires all remote vendors whose annual sales of tangible personal property in Alabama exceed $250,000 to collect and remit Alabama’s sales and use tax. Likewise, South Dakota enacted S.B. 106 in March, 2016 which requires all remote vendors who conduct 200 separate transactions annually or $100,000 in annual sales to collect and remit sales and use tax as though that seller had a physical presence in South Dakota. S.B. 106 goes into effect May 1, 2016.
With the increasing loss of sales and use tax revenues due to untaxed remote vendors, more states will likely challenge the Quill nexus requirements either through click-through nexus laws or by creating remote entity nexus laws. State laws, in addition to possible federal legislation and a possible Supreme Court decision on the issue, will create significant compliance challenges to vendors across the country doing business remotely.
Written by Justin Howe