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New York Issues Guidance in Response to the United States Supreme Court decision in South Dakota v. Wayfair, Inc.

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New York State today published a notice announcing that the State intends to immediately enforce existing rules requiring the collection and remitting of New York State sales tax by remote retailers transacting business in New York. The notice is a response to the 2018 U.S. Supreme Court decision in South Dakota v. Wayfair, Inc., which established that remote retailers may have tax nexus in states where they transact business, regardless of physical presence.

BACKGROUND

On June 21, 2018, the United States Supreme Court, in a 5-4 decision, ruled in favor of South Dakota and its economic nexus provisions for sales tax collection. In so doing, the Court overturned its prior decision in Quill (Quill Corp. v. North Dakota), which required that a retailer have a physical presence in a state in order to be required to collect sales tax for sales into that state. The South Dakota statute requires remote retailers with annual in-state sales exceeding $100,000 or 200 separate transactions to collect and remit sales tax.

NEW YORK STATE

On January 15, 2019, New York published N-19-1, which references existing New York provisions that define a vendor for sales tax to be a business that:

  1. Conducts more than $300,000 of sales of tangible personal property delivered to New York, AND
  2. Conducts more than 100 sales of tangible personal property in the state during the immediately preceding four sales tax quarters.

While these provisions have existed in New York for many years, the tax department did not actively enforce them previously. Today’s notice states that the provisions “immediately became effective” after the Wayfair ruling. While this suggests that enforcement will be retroactive, the vague language of the notice is unclear as to the exact date on which the registration requirement will become enforceable. The effective date may be January 15, 2019 (the date of the notice); June 21, 2018 (the date of the Wayfair decision), or some other date that New York may determine. Most other states enforcing nexus provisions have given taxpayers time to prepare for new registrations, but that does not currently appear to be the case with New York. The New York notice states that additional guidance will be forthcoming.

Taxpayers are advised to immediately review their current and past New York sales activity and consult their Marcum tax professional for the best course of action while awaiting further guidance from the State.

 
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John Bonk, Senior Manager, Tax & Business

Senior Manager
Tax & Business
Miami, FL
 
 
 
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