United States

Indiana enacts economic sales tax nexus provisions

TAX ALERT  | 

On April 28, 2017, Indiana Gov. Eric Holcomb signed House Bill 1129, requiring remote sellers with no physical presence in Indiana to collect, remit and comply with all applicable provisions of the Indiana gross retail tax (sales tax) code when remote sales are made to Indiana customers. The new economic sales tax provisions are effective July 1, 2017.

Accordingly, if a remote seller that does not have a physical presence with Indiana meets either of the following criteria in the current or previous calendar year, the remote seller must collect and remit the gross retail tax and follow all applicable procedures as if the remote seller had a physical presence in Indiana:

  1. The retailer merchant’s gross revenue from the sale of tangible personal property, products transferred electronically, or services into Indiana exceeds $100,000
  2. The retail merchant sells tangible personal property, products transferred electronically, or services into Indiana in 200 or more separate transactions

The requirements are substantially similar to the economic sales tax thresholds enacted in North Dakota, South Dakota and Wyoming.

House Bill 1129 also provides that, without an audit or other collection enforcement procedure, the state may bring a declaratory judgment action in any Indiana circuit or superior court against a person that the department believes meets the sales thresholds in order to establish that the person has an obligation to collect the tax. Once that action is filed, the Indiana Department of Revenue and any other state agency is prohibited from enforcing the economic sales tax nexus provisions. The declaratory judgment provisions are similar to those enacted in South Dakota, intended to enjoin the law and fast-track any litigation of the new nexus provisions.

Takeaways

House Bill 1129 includes several findings from the Indiana general assembly on why the nexus provisions were necessary. The general assembly listed the inability to effectively collect the tax from remote sellers and a ‘seriously eroding’ tax base as causing harms and loss of revenue to the state. The findings also suggest that the U.S. Supreme Court should reconsider the physical presence standards established through Quill v. North Dakota.

Almost two dozen states have introduced economic sales and use tax nexus bills this legislative session including Arkansas, Georgia, Maryland, Mississippi, Nebraska, North Carolina and Utah, among others. Thus far in 2017, North Dakota, Massachusetts and Wyoming have also enacted economic sales tax nexus provisions (with varying effective dates and sales thresholds) or promulgated policy addressing remote internet sellers. For a comprehensive overview of the economic sales and use tax nexus landscape, please read our article, Economic sales and use tax nexus laws.

AUTHORS


Subscribe to Tax Alerts



How can we help you with state & local tax planning?


RELATED SERVICES

Sales and Use Tax

Nexus