Montana reacts to Wayfair decision
When the Supreme Court of the United States ruled that physical presence was no longer the sole prerequisite for imposing tax on remote sales, it set off a chain reaction among states. The June 21, 2018, decision in South Dakota v. Wayfair, Inc. gives states more freedom to tax remote sales. Now, in addition to physical presence, a seller’s economic activity in a state can trigger an obligation to collect sales tax.
Economic nexus, as this is known, has been embraced by more than two dozen states already. Hawaii, Maine, and Vermont started enforcing economic nexus mere days after the Supreme Court ruling, on July 1, 2018; it will take effect in other states later this fall or early 2019. And more states are sure to follow suit: Arkansas, South Carolina, and Texas have already started to consider the best way to capture more remote sales tax revenue in light of the Wayfair ruling.
However, Wayfair isn’t universally celebrated.
Five states don’t have a general sales tax — Alaska, Delaware, Montana, New Hampshire, and Oregon (NOMAD). Of them, New Hampshire has been most vocal in its opposition to Wayfair. In late August, the state launched NH Has No Sales Tax, a website that cautions New Hampshire businesses to watch out for “fraudulent efforts to gain business information or even seek payment of fraudulent tax bills.” It’s implied that these “fraudulent efforts” are from states with remote sales tax laws.
Montana has taken quite a different stance. The Montana Department of Revenue recently published a summary of the Wayfair decision and advice to “Montana businesses selling online products to buyers in a state, such as South Dakota, that requires online retailers to collect sales tax.” They “need to collect and pay those sales taxes” and should “seek competent legal advice” on the best way to do so.
“Montanans shopping online” generally don’t owe sales tax to other states. Nonetheless, the Department of Revenue reminds they’ll be charged federal taxes on the purchase of airline tickets, “and may be charged state and local taxes” on hotel and rental car charges.
Although it’s a no-sales-tax state with many anti-sales-tax residents, there’s a pro-sales-tax contingency in Montana. From time to time, city governments seeking more revenue propose a local option sales tax. The most recent attempt to authorize a local option sales tax died, but another could arise at some point; perhaps after Montana retailers get used to collecting sales tax in other states?
The South Dakota v. Wayfair, Inc. decision is making sales tax compliance much more complex for businesses that sell into multiple states. Avalara’s state-by-state guide to sales tax economic nexus rules offers a first step toward simplifying it. Find it here.
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