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All eyes on impending Vermont use tax notification requirement

  • Dec 20, 2016 | Gail Cole

 Let the domino effect begin.

Earlier this year, Vermont enacted a use tax notification requirement similar to the one that’s been under dispute in Colorado since its inception in 2010. The effective date of the Vermont policy is tied to the implementation of the Colorado use tax notification policy: it's set to 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 … are implemented by the State of Colorado.” Last week, the Supreme Court of the United States allowed Colorado’s use tax notification requirement to stand; as a result, Vermont’s notification requirement is likely to take effect sooner than next July.

The Vermont policy requires out-of-state retailers to inform Vermont customers of their obligation to remit sales or use tax on taxable purchases if the vendor didn’t collect sales tax at the point of sale. The noncollecting vendor must also provide notification of the total amount of purchases made by a Vermont customer in the previous calendar year, provided the customer made $500.00 or more in purchases from that vendor (in the previous calendar year): “The notification shall state that the State of Vermont requires a sales or use tax return to be filed and sales or use tax paid on nonexempt purchases made by the purchaser from the noncollecting vendor.”

Noncollecting vendors who fail to provide the first notice to all Vermont customers are subject to a penalty of $5.00 “for each such failure.” Those who fail to provide the notice to customers with $500.00 or more in annual purchases are subject to a penalty of $10.00 “for each such failure, unless the noncollecting vendor shows reasonable cause for such failure.” See Act No. 134 for additional information.

Use tax notification domino effect

The Colorado Department of Revenue has yet to publicly comment on the standing of Direct Marketing Assoc. v. Brohl, or to formerly lift the injunction of the policy. However, the Data & Marketing Association (formerly the Direct Marketing Association) has expressed disappointment and concern that allowing the Colorado policy to stand “will only encourage other states to adopt similar laws and regulations….” Indeed, Louisiana enacted a use tax notification requirement (effective July 1, 2017) even before the Supreme Court allowed the Colorado policy to stand. And Vermont lawmakers clearly had an eye on Colorado’s use tax notification requirement.

For now, the Vermont Department of Taxes seems to be taking a wait and see approach — it hasn’t issued a statement concerning its use tax notification requirement since Colorado’s policy was allowed to stand. It will likely do so once the Colorado policy is implemented.

Although neither the Colorado nor Vermont use tax notification requirement is being enforced at this time, noncollecting catalog and internet retailers that make significant sales to consumers in Colorado and Vermont should prepare themselves for their eventual enforcement. Learn how tax automation software facilitates sales and use tax compliance in all states.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.