United States

Maine enacts economic sales tax nexus provisions

TAX ALERT  | 

On June 21, 2017, the Maine legislature overrode Gov. Paul LePage’s veto of LD 1405, requiring remote sellers with no physical presence in Maine to collect and remit sales tax in the same manner as a seller that has a physical presence in the state. The new economic sales tax provisions are effective Oct. 1, 2017.

Accordingly, LD 1405 requires sales tax collection by remote sellers making sales to Maine customers when either of the follow apply:

  1. The remote seller’s gross revenue from delivery of tangible personal property, products transferred electronically or services that are taxable by Maine into the state in the previous calendar year or current calendar year exceeds $100,000
  2. The remote seller sold tangible personal property, products transferred electronically or services that are taxable by Maine for delivery into the state in at least 200 separate transactions in the previous calendar year or the current calendar year

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

LD 1405 also provides that, without an audit or other collection procedure, the state may bring a declaratory judgment action against a remote seller that the state believes meets the sales thresholds in order to establish that the seller has an obligation to collect the tax. Once that action is filed, and assuming it involves a constitutional question, the state or court shall enjoin the law during the pendency of the action. 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

Gov. LePage vetoed the law out of concerns that small remote sellers may discontinue sales in Maine to avoid the new compliance requirements. Additionally, the governor expressed concern about exposure to litigation over the law and expressed support for a federal solution to remote sales tax collection, such as the Marketplace Fairness Act. In its legislative findings, the legislature cited an inability to effectively collect sales and use taxes from remote sellers and an erosion of the tax base as resulting in critical losses of revenue.

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, Indiana, 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.

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