Amazon to collect Vermont sales tax, February 2017
- Jan 24, 2017 | Gail Cole
Ecommerce giant Amazon.com has announced that it will voluntarily collect and remit Vermont sales and use tax as of February 1, 2017.
Amazon doesn’t have a physical presence in Vermont, and so it isn’t required to collect tax on its Vermont sales. Precedent holds that a state cannot impose a tax collection obligation on any company lacking substantial nexus, traditionally defined as a substantial physical presence, in the state (Quill Corp. v. North Dakota, Supreme Court of the United States, 1992). Nor does the internet retailer have Vermont affiliates: The company severed its ties to Vermont affiliates on January 6, 2015, in response to the state’s click-through nexus law.
Vermont has taken an interesting approach to establishing click-through nexus. Under the law enacted in 2011, a remote vendor is “presumed to have Vermont nexus for purposes of collecting sales tax if it has agreements with residents to refer customers that led to sales in excess of $10,000 in the previous year.” However, the law would not take effect until the attorney general established that at least 15 other states had enacted similar provisions. When Amazon severed ties with Vermont affiliates in early 2015, it did so proactively.
In October 2015, the A.G. determined that the click-through nexus law was effective as of October 13, 2015. A statement subsequently issued by the Vermont Department of Taxes explained, “More online retailers will be required to collect and remit Vermont sales tax on December 1, 2015.”
Use tax notification
The precedent established by Quill Corp. v. North Dakota makes it difficult for states to actually enforce click-through nexus policies. Therefore, several states have instituted use tax notification requirements, whereby noncollecting out-of-state companies must inform customers of their obligation to remit use tax on taxable purchases if sales tax wasn’t collected at the point of sale. For Vermont customers who have purchased at least $500 from a vendor in a calendar year, the noncollecting vendor must also provide a list of the total amount of their purchases in the previous calendar year. Out-of-state sellers that don’t provide this notification may be subject to a penalty of $10 “for each such failure.”
Vermont’s use tax notification requirement is scheduled to take effect on July 1, 2017. So why has Amazon decided to collect and remit Vermont tax now?
The company is keeping mum on its motivations, but its actions in Vermont are aligned with its actions in other states. As of January 1, 2017, Amazon is voluntarily collecting tax in Iowa, Louisiana, Nebraska, and Utah. It will collect South Dakota and Rhode Island sales and use tax beginning February 1, 2017, and Wyoming tax as of March 1. The way things are going, it could be collecting tax in yet another state by the time this post goes live.
It’s kind of fun to speculate: Is Amazon planning to open fulfillment centers, offices, and/or warehouses in all these states? Is it interested in starting Amazon Now programs in the states’ biggest cities (Burlington, population approximately 43,000, this means you)? Is it planning for the day that it will have large, floating fulfillment centers flying over the country? Is it simply being a good corporate citizen by giving these states some of the remote sales tax revenue they so crave?
Unless and until Amazon reveals its intentions, we just won’t know. But we do know that since the ball dropped, Amazon has started collecting or announced its intention to collect and remit tax in eight states.
What does Vermont stand to gain from this? Economists predict that the new use tax notification law will bring in approximately $382.1 million in 2017 and $396 million in 2018.
Tax automation software facilitates sales and use tax compliance for businesses of all sizes, in all states. Learn more.