Nevada looks to adopt economic nexus as early as October 1, 2018

Update 10.9.2018: The Nevada Department of Taxation has just updated its Remote Seller information page with this announcement: EFFECTIVE OCT. 1, 2018 - NEVADA REQUIRES REMOTE SELLERS TO COLLECT SALES TAX. According to the department, "Once a remote seller hits the threshold, ... they must register by the first day of the calendar month that begins at least 30 calendar days after they hit the threshold." For example, a remote seller that hits the threshold on October 1, 2018, must collect and remit Nevada sales and use tax starting November 1, 2018.

Nevada may be the next state to impose a tax collection obligation on remote sellers.

It used to be that a state could require a business to collect and remit sales tax only if the business had a physical presence in the state. That changed when the Supreme Court of the United States found the physical presence rule to be “unsound and incorrect” in South Dakota v. Wayfair, Inc. (June 21, 2018). Now, physical presence is no longer the sole prerequisite for sales tax collection.

South Dakota breaks physical presence barrier

South Dakota broke through the physical presence barrier with its 2016 economic nexus law (SB 106), which was fast-tracked for U.S. Supreme Court consideration in the event of the inevitable challenge.

SB 106 bases a tax collection obligation on economic activity in the state. Sellers with no physical presence in the state must collect and remit South Dakota sales tax if, in the current or preceding calendar year, they have:

• More than $100,000 in gross revenue from sales delivered into the state; or
• 200 or more separate transactions for delivery into the state.

The U.S. Supreme Court didn’t validate South Dakota’s economic nexus law — it was remanded to the state courts for further proceedings. Unwilling to wait for the courts, the South Dakota Legislature voted last week to enforce economic nexus as of November 1, 2018.

Approximately 25 other states already or soon will enforce economic nexus. It seems Nevada will soon be among them.

Nevada emulates South Dakota

On September 13, 2018, the Nevada Tax Commission unanimously approved Regulation R189-18, which expands a sales tax collection and remittance obligation to retailers with no physical presence in the state who, in the current or preceding calendar year:

• Have more than $100,000 in gross revenue from the retail sale of tangible personal property delivered into Nevada; or
• Made 200 or more retail sales of the same

The regulation also imposes a tax obligation on out-of-state retailers that engage “in any other activity that establishes a sufficient nexus with [Nevada] to satisfy the requirements of the United States Constitution.”

This isn’t quite a done deal: A legislative commission must approve the regulation before it can take effect. Yet it does have the support of Nevada Governor Brian Sandoval, who has urged the Legislative Commission to adopt it.

The Department of Taxation is tasked with establishing a start date, and October 1, 2018 is under consideration. According to the regulation, retailers meeting one of the above thresholds would be required to register with the department collect and remit tax on their Nevada sales “beginning on the first day of the first calendar month that begins at least 30 calendar days after the retailer meets that threshold.” Retroactive enforcement of the law will be prohibited.

Streamlined Sales Tax

Like South Dakota, Nevada is a Streamlined Sales Tax (SST) state. The Department of Taxation advises remote sellers who need assistance calculating, collecting, filing, and remitting sales and use taxes to learn more about the certified service providers (CSP) that contract with the organization, as they “can handle nearly all of a remote sellers’ sales and use tax responsibilities.”

An SST CSP, Avalara helps put businesses on the path to compliance. Learn more about Avalara and Streamlined Sales Tax.