States are broadening scope of economic nexus and marketplace facilitator laws

Now that Florida has enacted an economic nexus and marketplace facilitator law, most states require certain remote vendors and marketplace facilitators to collect and remit sales and use tax. Far fewer states require registered remote retailers and/or marketplace facilitators to collect and remit other taxes and fees. That’s starting to change. 

Did Wayfair open Pandora’s box?

It’s important to remember that states have only had the authority to require out-of-state sellers to collect and remit sales and use tax since the Supreme Court of the United States decided in favor of the state in South Dakota v. Wayfair, Inc. (June 2018).

The Wayfair ruling overturned a long-standing physical presence rule and allowed South Dakota’s economic nexus law to stand. This paved the way to today, where all states with a sales tax (except Missouri) have economic nexus laws that base sales tax obligations on a remote seller’s economic activity in a state (e.g., $100,000 in sales or 200 transactions in a year).

The ruling may also have opened Pandora’s box.

The Wayfair decision didn’t specifically authorize states to enforce economic nexus: All it did was remove the barrier to enforcing it — the physical presence rule.* The Supreme Court didn’t reference other types of taxes, but it was likely inevitable that states would eventually broaden the scope of their economic nexus laws.

Texas already applies its economic nexus standard to franchise tax, as Washington does to business and occupation (B&O) tax. Economic nexus also applies to certain taxes in Portland, Oregon, and San Francisco, California. And several states have an economic nexus standard for income tax, including Hawaii, Massachusetts, and Pennsylvania.

Florida wrote a broadening of the collection requirement directly in its new economic nexus law. For sales and use tax, economic nexus and the marketplace collection requirement take effect July 1, 2021. Starting April 1, 2022, registered remote retailers and marketplaces will also be liable for Florida’s 911 tax, lead-acid battery fee, and waste tire fee.

There’s more to tax than sales tax

If it acts like a sales tax in North Carolina, remote retailers probably need to collect it

There’s no mention of the following taxes in North Carolina’s economic nexus law or marketplace facilitator law: dry-cleaning solvent tax, motor vehicle lease and subscription tax, scrap tire disposal tax, white goods disposal tax, or the 911 service charge for prepaid wireless telecommunications service.

Yet according to the North Carolina Department of Revenue, marketplace facilitators are required to collect and remit these taxes where applicable. Information bulletins like the one for Dry-Cleaning Solvent Tax offer the best explanation for this: The taxes are “collected and administered in the same manner as the State sales and use tax.”

Remote retailer found liable for the Arkansas rim removal fee

In early 2020, the Arkansas Department of Finance and Administration ruled that although not liable for the state’s tire import fee, a remote seller was liable for the $3 rim removal fee on sales of new tires to end users because replacement tires require rim removal. This came as a surprise to the seller, which did not itself remove the waste tires.

The revenue ruling underscored that the collection obligation applied to remote sellers and marketplace facilitators with economic nexus — those with more than 200 transactions or $100,000 in aggregate sales of tangible personal property, taxable services, digital codes, or specified digital products in the state in the previous or current calendar year.

New collection requirements take effect in Indiana in 2021 and 2022

Starting July 1, 2021, registered remote retailers will be liable for three additional fees in Indiana: the fireworks public safety fee, prepaid wireless service charge, and waste tire management fee. 

Remote retailers and marketplace facilitators will also be responsible for collecting and remitting Indiana’s new tax on electronic cigarettes (the aptly named electronic cigarette tax) once it takes effect July 1, 2022.

Marketplace providers may soon be liable for more taxes and fees in California and Texas

California Assembly Bill 1402 would extend the state's marketplace facilitator collection obligation to any taxes or fees imposed upon a consumer in relation to a retail sale of tangible personal property by a marketplace seller. The bill has been well received.

If Texas Senate Bill 477 becomes law, registered marketplace facilitators will be liable for the state’s lead-acid battery fee and 911 emergency service fee on the sale of prepaid wireless telecommunications services. The change would take effect October 1, 2021.

Remote retailers liable for tobacco products tax in Virginia

As of January 1, 2021, a remote tobacco products distributor is required to collect and remit Virginia’s tobacco products tax if, in the current or previous calendar year, that distributor:

  • Has more than $100,000 in gross revenue from sales of tobacco products in Virginia; or
  • Engages in 200 or more separate tobacco products sales in Virginia

States move on peer-to-peer car sharing

More than one state wants to make marketplace facilitators liable for peer-to-peer (P2P) car sharing taxes, and some already do. However, there’s still a lot of uncertainty around this relatively new business model.

The Connecticut’s Office of Legislative Research isn’t quite sure whether tax applies to P2P services in Connecticut. While it determined sales tax “appears” to apply to car rentals of 30 days or less, “it is unclear whether a P2P car sharing company would (1) be considered a retailer required to collect and remit sales tax or (2) fall under Connecticut’s ‘marketplace facilitator’ law.”

In the coming months and years, especially if the P2P car sharing industry continues to grow, states will likely try to remove any such uncertainties. Change is already underway in several states, including but not limited to the following:


An Alabama Department of Revenue administrative rule doesn’t require marketplace facilitators to collect and remit the tax due on car rentals, but those that don’t voluntarily opt to do so must abide by new reporting and notice requirements as of April 12, 2021.


Arizona just adopted a law that subjects shared vehicle transactions to transaction privilege tax (TPT) and makes “programs” that accept payment for a shared vehicle transaction subject to TPT and affiliated excise taxes. The law doesn’t reference marketplaces but does require a P2P car sharing program to “register with the department for a license for the payment of taxes …. due from a shared vehicle owner on any shared vehicle transaction facilitated by the peer-to-peer car sharing program.”


On February 10, 2021, the Hawaii Department of Taxation announced that, as of March 1, 2021, P2P car sharing marketplaces are responsible for reporting and paying the Rental Motor Vehicle Surcharge Tax on any rental car transactions carried out on the marketplace.

A “peer-to-peer car-sharing marketplace” is defined as any person who assists in the business of providing rental motor vehicles or vehicles to the public by:

  • Providing an electronic or physical forum in which vehicle owners/authorized possessors can list or advertise vehicles for rent; and
  • Directly or indirectly (through an agreement with a third party) collecting payment from the lessee

This change is due to temporary administrative rules set to automatically expire August 9, 2022. The department is working to formally adopt the rule before then.


Under Indiana’s 2019 marketplace facilitators law, P2P vehicle sharing is a retail transaction subject to the state gross retail and use tax if sharing occurs more than 15 days in a calendar year. It also makes marketplaces liable for the taxes due on vehicle sharing.

But the Indiana law also exempts P2P vehicle sharing from both sales tax and the vehicle sharing excise tax if sharing occurs for fewer than 15 days in the current or preceding calendar year and “none of the payments for the vehicle are made through a marketplace facilitator.” The Indiana Department of Revenue describes this policy in depth in Information Bulletin #47.

South Carolina

A 2020 private letter ruling by the South Carolina Department of Revenue clarified that a marketplace facilitator was liable for collecting and remitting taxes on P2P car sharing services and short-term vehicle rentals.

Bills gunning for the finish line in Arkansas, Florida, Maryland, and Texas

Bills making their way through legislatures in Arkansas, Florida, Maryland, and Texas would make marketplace facilitators responsible for collecting and remitting tax on P2P car sharing services.

If enacted, Maryland House Bill 1209 would take effect July 1, 2021, while Texas House Bill 2415 would take effect October 1, 2021. No effective date is provided in Arkansas Senate Bill 351, but it does state that marketplace facilitators would be liable only if, in the previous or current calendar year, they facilitate either aggregate sales of $100,000 or 200 transactions.

As in Arizona, Florida Senate Bill 566 doesn’t mention marketplaces by name but does require P2P car sharing “programs” to collect and remit sales tax. If enacted as written, it would take effect January 1, 2022.

States comfortable with expanding innkeeper’s taxes

Several states are also making marketplace facilitators responsible for various lodging or hotel occupancy taxes. These include Georgia, Indiana, Kansas, and West Virginia.

Marketplace facilitators have been liable for Indiana’s innkeeper’s tax from the outset. Starting July 1, 2021, marketplace facilitators will also be responsible for collecting and remitting state and local lodging taxes in Georgia.

A new law in Kansas makes marketplace facilitators responsible for collecting and remitting transient guest taxes along with sales and use tax starting April 1, 2021. A year later, on April 1, 2022, they’ll be responsible for prepaid wireless 911 fees as well.

Under West Virginia Senate Bill 270, signed by the governor in March, marketplace facilitators meeting the state’s economic nexus threshold must collect and remit hotel occupancy tax on behalf of the hotel or hotel operators starting January 1, 2022.

States looking to expand their economic nexus standards have plenty of other taxes to choose from. If and when they do, we’ll track these developments in the Avalara blog.

*Physical presence still creates nexus but is no longer the sole requisite for it. 

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