Published on Mar 11, 2019

Wayfair implementation increases city sales tax collections

Contact: Candice Bock, Andrew Pittelkau

SSB 5581, sponsored by Sen. Christine Rolfes (D–Bainbridge Island), aligns state tax code with the Supreme Court of the United States 5-4 opinion in the case of South Dakota v. Wayfair. The court's opinion favoring South Dakota allows states to collect sales tax on goods sold from remote out-of-state sellers. The opinion reverses the physical presence standard set in the prior cases of Quill (1992) and Bellas Hess (1967) stating, "sellers who engage in a significant quantity of business in the state, and respondents are large, national companies that undoubtedly maintain an extensive virtual presence."

EHB 2163, which passed in the 2017 session, required marketplace facilitators with at least $10,000 in gross receipts to begin collecting and remit sales tax for out-of-state sellers on their platforms or to provide notice and reporting for customers effective January 1, 2018. Following the Wayfair decision, the Department of Revenue (DOR) made a regulatory change effective October 1, 2018, that businesses meeting the threshold of $100,000 or 200 transactions must register and collect sales tax. Businesses below the threshold were still required to either register and collect or report.

SSB 5581 aligns DOR’s regulatory change with Wayfair.

Cities are estimated to collect the following additional sales tax from goods sold from remote out-of-state sellers:

  • $13.7 million in the 2019-21 biennium
  • $19.9 million in the 2021-23 biennium
  • $21.7 million in the 2023-25 biennium

SSB 5581 is headed to the governor’s desk for signature. The Senate concurred with the House change of not applying the sales and use tax to unroasted coffee beans sold by foreign marketplace sellers.

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