Arizona and Georgia lower economic nexus thresholds for remote sellers, January 1, 2020

Arizona and Georgia lower economic nexus thresholds for remote sellers, January 1, 2020

Like more than 20 other states, Arizona and Georgia began requiring certain remote sellers to collect and remit sales tax in 2019. And as in several other states, their collection requirements have changed a bit over time. Thus, remote sellers must contend with slightly different remote sales tax requirements in Arizona and Georgia starting January 1, 2020.

Both states now enforce economic nexus, meaning they require out-of-state sellers with no physical presence in the state to collect and remit sales tax if their sales into the state cross a certain threshold. Variously known as the economic nexus threshold, remote seller threshold, or small seller threshold, the threshold is based on sales volume or number of transactions in a state, or both. It depends on the state.

Arizona eases remote sellers into collection

Arizona baked a threshold change right into its economic nexus law, which has been in effect since October 1, 2019. It’s easing smaller remote sellers into collection by gradually reducing the sales threshold over time.

Remote retailers had to register with the Arizona Department of Revenue and collect and remit Arizona sales tax (in actuality transaction privilege tax, or TPT) if their gross income or gross proceeds from sales of taxable and exempt tangible personal property or services exceeded $200,000 in the previous or current calendar year (i.e., 2018 or 2019).

As of January 1, 2020, that threshold drops to $150,000. In other words, if applicable gross proceeds in Arizona exceed $150,000 in 2019 or 2020, sellers need to register with the department and collect and remit TPT.

The threshold will drop a third and final time in 2021.

Georgia lowers threshold

Georgia is also lowering its remote seller threshold, though it decided to do so several months after it started enforcing economic nexus (January 1, 2019).

The current threshold is more than $250,000 in sales or at least 200 separate transactions of retail sales of tangible or intangible personal property into the state. As of January 1, 2020, the sales threshold drops to more than $100,000 in sales; the transactions threshold of 200 remains unchanged.

The Peach State was one of the first in the nation to require out-of-state sellers with no physical presence in the state to collect and remit sales tax. In fact, it did so before states won the right to tax remote sales with the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. (June 21, 2018).

Because at the time all states were on shaky ground when it came to requiring remote sellers to collect, Georgia gave them an out: They could either collect and remit Georgia sales tax or comply with non-collecting seller use tax notice and reporting requirements. In its own way, it was easing remote sellers into collection, à la Arizona.

The use tax notice and reporting requirements for non-collecting sellers were repealed effective April 28, 2019.

Expect there to be more developments in the world of remote sales tax in 2020. Washington's economic nexus threshold is also amended as of January 1, 2020. And Georgia could make marketplace facilitators responsible for collecting and remitting sales tax on third-party sales. Close to 40 states — including Arizona — have already done so.

Learn more about remote sales tax obligations in all its guises in Avalara’s seller’s guide to nexus laws and sales tax collection requirements.

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