Vermont cracks down on remote vendors
- Jun 3, 2016 | Gail Cole
Vermont is cracking down on use tax compliance in its continuing effort to obtain more revenue from remote vendors. The state began enforcing its click-through nexus law on December 1, 2015, thereby expanding the number of out-of-state retailers required to collect Vermont sales tax. Now it plans to penalize noncollecting vendors who fail to comply with the state’s use tax notification requirements.
State law defines “noncollecting vendor” as “a vendor that sells tangible personal property or services to purchasers who are not exempt from the sales tax under this chapter, but that does not collect the Vermont sales tax.”
Noncollecting vendors have been required since 2011 to notify Vermont purchasers that sales or use tax is due on nonexempt purchases, and that they're required by the State of Vermont to remit any use tax owed on their annual tax returns.
Recently enacted legislation subjects vendors who fail to provide this notice to “a penalty of $5.00 for each such failure, unless the noncollecting vendor shows reasonable cause for such failure.”
In addition, on or before January 31 of each year, noncollecting vendors must provide Vermont purchasers who have made $500 or more worth of purchases from them in the previous calendar year with “the total amount paid by the purchaser for Vermont purchases made from the noncollecting vendor in the previous calendar year.” This notice must inform purchasers of their use tax obligation. It cannot be included with a shipment but must be sent separately to Vermont purchasers via either first-class mail or electronic mail (e-mail), and be marked.
Vendors who fail to provide this separate notification will be subject to a penalty of $10.00 “for each such failure,” unless reasonable cause can be proven.
Vendor redefined
To expand the number of potential noncollecting vendors, the bill also amends the definition of vendor to include the following:
- A person making sales of tangible personal property from outside this State to a destination within this State and not maintaining a place of business or other physical presence in this State that:
- Engages in regular, systematic, or seasonal solicitation of sales of tangible personal property in this State:
- By the display of advertisements in this State
- By the distribution of catalogues, periodicals, advertising flyers, or other advertising by means of print, radio, or television media; or
- By mail, Internet, telephone, computer database, cable, optic, cellular, or other communication systems, for the purpose of effecting sales of tangible personal property; and
- Has either made sales from outside this State to destinations within this State of at least $100,000, or totaling at least 200 individual sales transactions, during any 12-moth period preceding the monthly period with respect to which that person’s liability for tax under this chapter is determined.”
- Engages in regular, systematic, or seasonal solicitation of sales of tangible personal property in this State:
Effective date
Vermont is linking the effective dates of these policies to broader state and federal attempts to overturn existing precedent and grant states the authority to collect sales tax revenue from certain out-of-state vendors lacking the physical presence in a state normally required for sales tax imposition.
The informational reporting, the definition of vendor, and the out-of-state vendor notification requirements (Sections 21a and 25-26) will take effect on the earlier of July 1, 2017, or beginning on the first day of the first quarter after the sales and use tax reporting requirements challenged in Direct Marketing Assoc. v. Brohl, 814 F.3d 1129 (10th Cir. 2016) are implemented by the State of Colorado. Colorado’s use tax notification requirement for noncollecting retailers has been deemed legal by the Tenth Circuit Court of Appeals, but it is not yet in effect.
The definition of vendor (Section 27) takes effect on the later of July 1, 2017 or beginning on the first day of the first quarter after a controlling court decision or federal legislation abrogates the physical presence requirement of Quill v. North Dakota, 504 U.S. 298 (1992). Numerous states are creating legislation to challenge Quill; as of this writing, South Dakota is leading that charge.
See House Bill 873 (Act 134) for additional details.
Avalara AvaTax provides a simple solution for sales and use tax compliance, particularly for businesses selling in multiple tax jurisidctions. Learn more.
