New York updates sales tax guidance for marketplace providers

The New York Department of Taxation and Finance has published new sales tax collection guidelines for marketplace providers. However, the department’s website still contains a good deal of conflicting information about remote seller sales tax collection requirements in the Empire State.

TSB-M-19(2.1)S (October 17, 2019) reminds us that New York law requires marketplace providers to collect sales tax on facilitated sales of taxable tangible personal property as of June 1, 2019. That’s old news.

The big announcement is that the annual sales threshold that triggers the collection requirement for remote marketplace providers (and all remote sellers) increased from $300,000 to $500,000 due to the enactment of S.6615. The change for remote sellers is effective retroactively, as of June 21, 2018.

That, too, is old news. However, this is the first time the New York Department of Taxation and Finance has acknowledged the threshold change. What took it so long?

It’s frustrating to have inaccurate guidelines on a tax department website. Yet to be fair, the last 16 months have been tumultuous for state legislators and tax authorities.

On June 21, 2018, the Supreme Court of the United States threw the sales tax world off its axis with its decision in South Dakota v. Wayfair, Inc., which enables states to require businesses with no physical presence in the state to collect and remit sales tax. Prior to the Wayfair ruling, states couldn’t tax remote sales.

These are heady times for the 45 states (plus Washington D.C.) that have a general sales tax: They have new-found power to tax remote sales. And indeed, since Wayfair, 43 states and D.C. have adopted economic nexus laws or rules requiring many out-of-state sellers to collect and remit sales tax.

Additionally, 36 states and D.C. have adopted marketplace facilitator laws requiring marketplace providers to collect and remit tax on all sales made through the platform, including third-party (marketplace) sales. Marketplace laws enable states to capture sales tax revenue from remote retailers that aren’t taxed under economic nexus laws because they qualify for a small seller exception.

With so many new laws in play, it’s hard for businesses to know when and where they’re required to collect. It’s therefore essential for state tax authorities to provide clear guidelines as soon as possible. Unfortunately, the New York Department of Taxation and Finance has been less than prompt. 

TSB-M-19(2.1)S clearly states that it supersedes TSB-M-19(2)S.

The October bulletin also highlights, in bold, the fact that the annual sales threshold for marketplaces changed from $300,000 to $500,000 as of June 1, 2019. It goes on to state that a marketplace provider with no physical presence in New York is required to collect and remit tax for all facilitated sales if, in the previous four sales tax quarters, it:

• Has more than $500,000 in cumulative gross receipts from sales of tangible personal property made or facilitated and delivered in New York; and
• Made or facilitated more than 100 sales of tangible personal property delivered into New York.

Aside from explaining the threshold change, TSB-M-12(2.1)S and TSB-M-12(2)S are substantially the same.

What’s potentially confusing for businesses is that the May 31 bulletin is still available on the department’s website and hasn’t been updated to clarify that it’s been superseded.

Other New York State Department of Taxation and Finance publications also still list the $300,000 sales threshold rather than the $500,000 threshold. These include:

• Notice Regarding Sales Tax Registration Requirement for Businesses with No Physical Presence in New York State
• Registration requirement for businesses with no physical presence in New York State
• FAQs related to registration requirement for businesses with no physical presence in NYS

It’s extremely hard for businesses to keep up with the many new sales tax collection requirements that have been adopted since the June 2018 Wayfair decision — especially when new collection requirements change.

Most state tax authorities are clearly striving to keep taxpayers well-informed. Unfortunately, when they stumble, businesses can end up relying on outdated information. And that can lead to costly errors.

Avalara's seller's guide to nexus laws and sales tax collection requirements for remote sellers provides state-by-state information on economic nexus and marketplace facilitator laws, and more. It's a good place to start if you're looking for more details on each state's remote sales tax requirements. 

If you're ready to share the heavy lifting of sales tax compliance, consider automating sales tax compliance.