Wisconsin eliminates economic nexus transaction threshold
Updated March 3, 2021
Out-of-state retailers no longer need to tally sales into Wisconsin. Effective February 20, 2021, the transaction threshold is eliminated from the state’s economic nexus law.
Wisconsin was one of the first states to adopt an economic nexus law in the wake of the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. (June 21, 2018). The Wayfair decision overturned a rule that had long prevented states from imposing a sales tax collection obligation on businesses with no physical presence in the state. In so doing, Wayfair effectively granted states the authority to base a sales tax collection obligation solely on an out-of-state seller’s economic activity in the state, or economic nexus.
The Supreme Court highlighted three features of South Dakota’s law that “appear designed to prevent discrimination against or undue burdens upon interstate commerce”:
- The economic nexus law provides safe harbor for small businesses (those with less than $100,000 in sales or 200 transactions in the state in the current or previous calendar year)
- The economic nexus law cannot be applied retroactively
South Dakota is a member of the Streamlined Sales and Use Tax Agreement (SST), which standardizes taxes to reduce administrative and compliance costs
Like many states quick to act after Wayfair, Wisconsin emulated the South Dakota economic nexus law that triggered the Supreme Court case. It enforces economic nexus on a prospective basis only and includes a safe harbor provision for small businesses. Wisconsin is also an SST member state.
The economic nexus law that took effect in Wisconsin on October 1, 2018, provided a small seller exception for remote retailers whose sales of products and services in the state did not meet either of the following thresholds in the current or previous calendar year:
- More than $100,000; or
- 200 or more separate transactions
With the enactment of 2021 Assembly Bill 2, the 200 or more transactions threshold is eliminated. Under the bill, “an out-of-state retailer that has annual gross sales into this state in excess of $100,000 in the previous or current calendar year must register with DOR and collect the sales tax on those sales.”
According to a representative from the Wisconsin Department of Revenue, the 200 transactions threshold applies through February 19, 2021. "If a seller was required to register only due to meeting [the] transactions threshold in the previous year, they would have collection requirements through Februray 19, 2021. On Feburary 20, 2021, the seller could inactivate its permit."
The transactions and sales thresholds both apply to calendar year 2020 and the period January 1, 2021 through Feburary 19, 2021. Additional information and examples can be found in Registration and Collection Dates for Remote Sellers.
California, Iowa, North Dakota, and Washington state also eliminated transaction thresholds originally included in their economic nexus laws. See details in this state-by-state guide to economic nexus laws.
2021 AB 2 (Act 1) was signed into law on February 18, 2021, and published February 19, 2021. The effective date is the day after publication.
The Avalara Sales Tax Risk Assessment can help you understand where you need to register to collect and remit sales tax.
The 2021 sales tax changes report: midyear update
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