The Next Round of New Sales Tax Laws in CA, FL and NM
As we approach the one-year anniversary of the U.S. Supreme Court’s South Dakota v. Wayfair, Inc. decision, a wave of new sales tax laws is about to be enacted in several large states throughout the country.
Already to date there are laws in more than 30 states and several more set to go into effect in 2019. While some of these laws were already on the books before Wayfair and weren’t enforceable pending legislation, many others have been passed since the ruling as states no longer face constitutional challenges to their taxing authority on out of state sellers.
Let’s take a closer look at what this means for sellers who are active in California, Florida and New Mexico, and when these new regulations are expected to go into effect.
California’s Out-of-State Sales Tax Rules
By far the most impactful of the changes to date is that in California. With more than 40 million residents, the largest state economy in the United States and the fifth largest economy in the world, California is an economic powerhouse. In many other ways, as California goes, so goes the country.
So, it’s significant that California’s out-of-state requirements went into effect on April 1, 2019. The new rule, which is not retroactive, so will only apply to new sales made on or after April 1, requires that all sellers who do a certain level of business in California register with the California Department of Tax and Fee Administration to collect sales tax. Previously, only those with physical presence in the state were required to do so, but it will now apply to anyone with economic nexus in the state.
California’s ruling also impacts California businesses as it expands the jurisdiction of local taxing authorities for good sold over county and city lines. The threshold for having to comply are $100,000 in annual sales or 200 or more transactions per calendar year.
Florida’s New Sales Tax Bill
Florida to date has no laws on the books to collect sales tax from out of state sellers. Because of Wayfair, this is likely to change as their legislature advances Senate Bill 1112. Currently in the Finance and Tax committee after unanimously passing the Commerce and Tourism committee, the bill is expected to be enacted, establishing economic nexus and marketplace facilitator rules starting July 1, 2019.
Out of state sellers will be required to collect and remit sales tax if they make more than $100,000 in sales in a calendar year or conduct 200 or more transactions in the state. Additionally, the new law includes provisions requiring eCommerce sites with marketplaces featuring third party sellers to collect sales tax on their behalf.
New Sales Tax Changes in New Mexico
Like Florida, New Mexico currently has no law for collecting sales tax from remote sellers. They are looking to change that in 2019 with several possible changes being considered. Additionally, New Mexico taxes based on seller origin, so local municipalities are unable to tax the sales made there by these retailers.
The new laws would address several of these issues with changes to:
- Economic Nexus – House Bill 579 includes a provision to task out-of-state sellers with collecting sales tax if they make more than $100,000 in sales per year in New Mexico starting on July 1, 2019.
- Local Sales Tax – This bill would also change how sales taxes are sourced in New Mexico, meaning taxes would be paid to both the state and municipality in which goods are sold. This provision would go into effect January 1, 2021.
- Marketplaces – A marketplace facilitators would be liable to collect and remit sales tax on behalf of third-party sellers on their platforms starting on July 1, 2019 as well.
- Digital Goods – The new law would also implement a sales tax on digital goods such as music, movies, phone applications and other software, photography, and books.
The current bill has support in both the legislature and Governor’s office and is expected to pass sometime this year.