New Economic Nexus States as of October 1st
Economic nexus laws have been enacted by more states since June 2018, U.S. Supreme Court Case, Wayfair vs South Dakota. This simply means when you pass the threshold of unit sales or total sales in the period, your business is responsible for sales tax moving forward.
Update: As of October 2019, there are now 44 economic nexus states. The good news is that some states have dropped the transactions, including California, Idaho, South Carolina, and others. California now is $500K in sales and no transactions (same as Texas).
Do You Need to Register for a Sales Tax Permit on October 1st in These States? Not likely, but maybe soon.
There are several that go into effect today, October 1st, 2018. Does this mean you are responsible for sales tax from Oct 1st, forward, not necessarily? You are responsible for Oct 1st forward when you pass the economic nexus rules in that state. Which is likely to be the transactions level (most states are 200). That means, as soon as you pass 200 transactions in sales after Oct 1st in the states below, that is when you are responsible to collect and remit sales tax from that point forward.
Should You Register for a Sales Tax Permit, After You Pass the Threshold?
When you register for a sales tax permit in the future you will be responsible for sales tax from the date you passed the threshold.
If you passed the date on December 15th, 2018 but did not register for a sales tax permit until Feb 1st, 2019, that means you will have to pay sales tax, penalties, interest, plus late fees on at least one return or perhaps two (one for December and January).
This is similar to when you first had stock as an Amazon FBA seller in the state, that is the date that triggered sales tax nexus. You likely will register after that date to collect and remit sales tax.
The gap between when you first had sales tax nexus, and when you register to collect and remit and updated your tax settings to collect sales tax, is when you are responsible for all sales tax, penalties, interest and sales tax returns. After this time frame, your customers should pay sales tax (assuming you updated your tax settings that were not already updated by the marketplace facilitator).
New Economic Nexus Laws Summary for October 1st
Eleven (11) states with economic nexus laws take effect on Nexus October 1st, nine use the common pattern of $100,000/200 transactions threshold. You may already be registered in most of these states because if you are selling on Amazon FBA. All, except for North Dakota, are an Amazon FBA state.
- Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, Washington, Wisconsin are all Amazon FBA states (except for North Dakota).
These two states have different requirements but are also effective on October 1st.
- Alabama: more than $250,000 and certain additional activities. This means you would only register when your sales passed $250K in a calendar year.
- Minnesota (FBA state also): 10 or more retail sales totaling more than $10,000, or 100 or more retail sales, or $100,000 in total sales in a calendar year.
States with a November Start Date
- South Carolina and South Dakota start on November 1st. South Carolina does not have a transaction requirement, only $100K in sales.
Need Help Getting Registered for Sales Tax Permits? If you did not already register in these Economic Nexus states (some are FBA states also) and you are likely to pass the transaction threshold soon, reach out to sales tax system to order permits. Before you register for sales tax permits, we would recommend our Virtual Scanning solution, to make sure you receive all your mail in an organized folder system. This will save you a lot of time and money. Learn more about our Virtual Address services at this link.