The past few years have seen incredible and widespread changes to online sales tax legislation across the country. A large number of these changes stem from the 2018 Wayfair decision, which prompted many states to adopt economic nexus and marketplace facilitation legislation.
Now that almost every state with a general sales tax has implemented Wayfair-related legislation, you might expect things to calm down a bit.
You would be wrong. As a result of evolving attitudes regarding digital services, such as video streaming, and the continued growth of e-commerce, many states are reevaluating, changing or implementing new legislation to govern these digital transactions.
Additionally, while the majority of states have implemented economic nexus and marketplace facilitation legislation, most are still tweaking and refining their laws. A number of organizations are also calling for reform due to the increased complexity that these laws are creating. And, in the case of Oregon (which doesn’t have a sales tax), they’ve created a new tax to increase their revenue streams!
To cut a long story short, the world of online sales tax has never been more tumultuous, and change is happening at a rapid pace. To help you stay informed and keep up with online sales tax developments, we’ve outlined several recent changes that could impact your business below.
While Oregon doesn’t have a general sales tax, the state is still looking for ways to boost revenue. The Gross Receipts Tax (GRT) is one such avenue. One major difference to note is that instead of being paid by the consumer, this tax is paid by the retailer. Currently, there are only nine states that impose GRT: Delaware, Michigan, Nevada, Ohio, Tennessee, Texas, and Washington with the newest member on the list, Oregon.
The GRT is also known as a Corporate Activity Tax (CAT), which is imposed on each person with taxable commercial activity for the privilege of doing business in this state. It is measured on a business’s commercial activity, which is the total amount a business realizes from transactions and activity in Oregon. Oregon’s CAT became effective on January 1, 2020.
The term “Person” includes individuals, combinations of individuals of any form, firms, companies, C corporations, LLCs and partnerships. Certain items are excluded from the definition of commercial activity and, therefore, will not be subject to the CAT, including but not limited to, interest income, dividends, retail sales, gifts, tips or gratuities collected. In addition, Oregon’s CAT allows a 35 percent subtraction for certain business expenses.
Oregon has four thresholds that determine whether a business or unitary group is responsible for the CAT. The thresholds depend on the amount of commercial activity the business or group has during the year.
- Less than $750,000 in sales: No CAT requirements.
- $750,000+: Business or unitary group must register for the CAT.
- $1,000,000: Business or unitary group must file a return.
- More than $1,000,000: Business or unitary group must file a return and pay CAT.
The department may impose a penalty for failing to register, not to exceed $100 per month, up to $1,000 per calendar year. The corporate activity tax is due and estimated tax payments are payable to the department on or before the last day of January, April, July and October of each year for the previous calendar quarter.
Additionally, a taxpayer expecting $5,000 or less of CAT liability for a calendar year does not need to make estimated payments, but still must file an annual return and pay CAT liability no later than April 15 of the following calendar year.
If you’re doing business in Oregon, it’s important to note that if you expect a CAT liability for 2020 the first returns were due April 15, 2021. However, if you missed the filing date, you can still go back and file as soon as possible to avoid or reduce underpayment penalties.
As we shared in last week’s blog article, Florida has finally joined the ranks of states with Wayfair-related legislation. To support businesses through the transition, Florida has also implemented an economic nexus amnesty program, which allows companies to come forward and self-report tax liabilities.
Details of the program include:
- The company must register as a Florida retailer for sales tax before Oct. 1, 2021 to qualify for the amnesty. The statute leaves no wiggle room for registering on or after Oct. 1, 2021.
- The amnesty is only for remote sales that happen before July 1, 2021. So, a remote seller that registers during September of 2021 will still be responsible for Florida sales tax on remote sales made into Florida for July, August and September 2021 (unless made through a marketplace provider).
- This amnesty also applies to remote sales facilitated through a marketplace provider before July 1, 2021.
- The amnesty program does not apply to anyone who, as of July 1, 2021, is under audit or has been issued an assessment, notice, demand for payment or is under an administrative or judicial proceeding.
- If a company qualifies for the amnesty program, it will be applied to remote sales by company, even if the remote sales began 15 years ago. This is a huge win for many remote sellers, potentially even Amazon FBA sellers.
We recently published an article detailing Maryland’s new tax on digital products and services. More recently, the state’s general assembly passed S.B. 787, which amends this legislation.
It clarifies how tax applies to digital products and services, by exempting digital advertising services. The state governor has 30 days to act on the bill, but is neither expected to sign it nor veto it. Subsequently, this makes it law. This law becomes retroactive as of March 14.
These changes shared above are just the tip of the iceberg when it comes to the evolving world of online sales tax. If you’re a business owner and have questions about online sales tax, economic nexus or marketplace facilitation, please contact us today. We’re happy to clarify any multi-state tax issues you’re trying to navigate.
