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Sales Tax

Minnesota Requires Remote Sellers and Marketplace Providers Facilitating Sales into Minnesota to Start Collecting Sales Tax By October 1, 2018

Thomson Reuters Tax & Accounting  

Thomson Reuters Tax & Accounting  

by Peter G. Pupke, Esq. (RIA)

The Minnesota Department of Revenue will require remote sellers and marketplace providers facilitating sales into Minnesota to begin collecting sales tax no later than October 1, 2018. The decision by the U.S. Suprme Court in South Dakota v. Wayfair, Case No. 17-494, 06/21/2018, allows states like Minnesota to require remote sellers with no physical presence, such as online and mail-order companies, to collect and remit the applicable sales or use tax on sales delivered to locations within their state. The Court’s decision in Wayfair caused Minnesota’s existing law regarding remote sellers and marketplace providers, to become effective. As a result, no later than October 1, 2018, remote sellers that sell goods or services into Minnesota from other states must register and begin collecting and remitting Minnesota sales tax and marketplace providers must register and begin collecting Minnesota sales tax on behalf of remote sellers using their marketplace. (News release, Minn. Dept. Rev., 07/25/2018; Update for Remote Sellers, Minn. Dept. Rev., 07/25/2018; Update for Marketplace Providers, Minn. Dept. Rev., 07/25/2018; Frequently Asked Questions: Sales and Use Tax – Tax Information – Streamlined Sales Tax Information, Minn. Dept. Rev., 07/16/2018.)

Remote sellers.  Minnesota law requires all sellers to collect sales or use tax to the extent allowed under the United States Constitution. The U.S. Supreme Court decision in Wayfair allows states like Minnesota to require remote sellers with no physical presence, such as online and mail-order companies, to collect and remit the applicable sales or use tax on sales delivered to locations within their state. The Court’s decision in Wayfair caused Minnesota’s existing law, which was enacted in 1989, to become effective. Remote sellers that sell goods or services into Minnesota from other states must register and begin collecting and remitting Minnesota sales tax no later than October 1, 2018.

Generally, a remote seller is a business that sells its products to customers in a state, using the Internet, mail order, or telephone, without having a physical presence in that state. Remote sellers that were registered in Minnesota before the U.S. Supreme Court’s decision in Wayfair , are not impacted by this decision. Such sellers need to continue to collect and remit sales and use tax. Remote sellers that were not already registered in Minnesota before the U.S. Supreme Court’s decision in Wayfair must register and begin collecting sales tax in Minnesota no later than October 1, 2018, unless the remote seller meets the small seller exception (see herein).

Small seller exception: Minnesota has a small seller exception, which does not require remote sellers to collect sales tax until their sales during a period of 12 consecutive months total either: (1) 100 or more retail sales shipped to Minnesota; or (2) 10 or more retail sales shipped to Minnesota that total more than $100,000.

Remote sellers selling through a marketplace:  If a remote seller only makes taxable sales into Minnesota through a marketplace and the marketplace is collecting and remitting Minnesota sales tax on the remote seller’s behalf, then the remote seller does not need to register and collect Minnesota sales tax. If the marketplace is not collecting Minnesota sales tax on the remote seller’s behalf, the remote seller must collect Minnesota sales tax on its taxable sales unless it meets meet the small seller exception.

If all retail sales into Minnesota combined—including a remote seller’s sales made through any marketplace, the remote seller’s own website, and through other sources—exceed the small seller exception, then sales tax must be collected and remitted to Minnesota. The remote seller must collect and remit sales tax on the seller’s taxable sales through its website and other sources. If the marketplace is not collecting Minnesota sales tax on the seller’s behalf, then the seller must also collect Minnesota sales tax on its taxable sales made through that marketplace.

Marketplace providers.  Minnesota law also requires certain Marketplace Providers to collect and remit Minnesota sales tax on all taxable retail sales made into Minnesota facilitated by the marketplace. Remote sellers do not need to collect sales tax when a marketplace provider is collecting and remitting. The U.S. Supreme Court’s decision in Wayfair also caused Minnesota’s 2017 marketplace provider law to become effective. Marketplace providers must register and begin collecting Minnesota sales tax on behalf of remote sellers using their marketplace no later than October 1, 2018.

A marketplace provider is any person, other than the seller, who facilitates a retail sale by: (1) listing or advertising the seller’s products; and (2) processing the payments from the customer, either directly or indirectly through a third party, regardless of whether the marketplace provider receives compensation or other consideration in exchange for its services.

Requirement to collect and remit tax on behalf of remote sellers:  A marketplace provider must collect and remit Minnesota sales tax on all taxable sales into Minnesota made by a remote seller through the marketplace unless any of the following are true: (1) the remote seller makes taxable retail sales into Minnesota through the marketplace of less than $10,000 in a 12-month period ending on the most recently completed calendar quarter; (2) the remote seller elects to register and collect Minnesota sales tax directly and does not enter into an agreement with the marketplace provider for the marketplace to collect and remit Minnesota sales tax on behalf of the remote seller; or (3) the marketplace provider does not maintain a place of business in Minnesota.

Requirement to collect and remit tax on behalf of Minnesota sellers:  A seller physically present in Minnesota should already be collecting and remitting Minnesota sales tax on all taxable sales into Minnesota including sales made by the seller through a marketplace. Minnesota sellers should continue to collect and remit unless the Minnesota seller enters into an agreement with the marketplace provider for the marketplace to collect and remit Minnesota sales tax on behalf of the Minnesota seller.

Streamlined sales tax. The Department has also updated its information on the benefits of the Streamlined Sales and Use Tax agreement to businesses to comply with their Minnesota sales tax obligations.

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