Indiana’s Wayfair Compliance Deadline is October 1 Indiana’s Wayfair Compliance Deadline is October 1

Indiana’s Wayfair Compliance Deadline is October 1

In South Dakota v. Wayfair, Inc., 138 S.Ct. 2080 (2018), decided in June of this year, the United States Supreme Court eliminated one of the fundamental requirements for imposing sales tax collection obligations on remote vendors, most notably on sales over the internet. In the past, a vendor needed a “physical presence” in a state in order to be obligated to collect sales tax in the purchaser’s state, and the result was that sales tax was not collected by many vendors, leaving the purchaser with a use tax payment obligation, an obligation that was often not fulfilled. In Wayfair, the Supreme Court eliminated the physical presence requirement and created a greater opportunity for states to impose a sales collection and remittance obligation on vendors in other states.

Like other states, Indiana began efforts to determine its response to the Supreme Court’s holding in Wayfair, a decision which left many questions unanswered. Indiana had enacted legislation in 2017, House Enrolled Act 1129 (2017), which reflected essentially the same nexus standard and approach as South Dakota’s laws (more than $100,000 of revenue or 200 or more transactions). Shortly after Indiana’s law was passed and immediately before it was to go into effect, a lawsuit was filed, American Catalog Mailers Ass’n and NetChoice v. Krupp, Holcomb, and Indiana Dep’t of Revenue, Marion Sup. Ct., Case No. 49D01-1706-PL-025964, but that lawsuit was stayed pending a decision in Wayfair. After the Supreme Court’s decision in Wayfair, the Indiana lawsuit was jointly dismissed on certain agreed conditions on August 27, 2018. 

Beginning October 1, 2018, taxpayers must begin collecting and remitting sales tax to Indiana in conformity with Wayfair. Many questions remain:
 
  • What will Indiana view as a “transaction”? If an agreement contains multiple transfers, is that one or multiple transactions? Will exempt transactions count? Will multiple related vendors be subject to separate counts?
  • How will Indiana handle obligations with respect to the initial transactions in the first year in which the thresholds are met?
  • Will Indiana supply compliance software for taxpayers who do not participate in the SSTP?
  • Is physical presence still relevant, such as if the thresholds are not met?
  • How will Indiana enforce these obligations against foreign (non-U.S.) sellers? And how will Indiana handle threats from states attempting to protect vendors from these obligations?
  • Will Indiana attempt to impose obligations on marketplace providers?
  • How will more complex sales be sourced, such as with drop shipments, involving more than two parties and/or more than two states?
  • What electronic documentation will be required or allowed for substantiation (e.g., invoices) or for exempt transactions (e.g., exemption certificates)?
  • How aggressive will Indiana be with respect to “responsible officers”?
  • Will registration trigger a nexus questionnaire and impact other tax obligations to the State of Indiana, and will Indiana apply the Wayfair nexus standard to its adjusted gross income tax?
  • Will Indiana allow any relief from this implementation date if a taxpayer shows good cause for the need for more time to become compliant?
We understand that the Department plans to publish responses to FAQs and provide other forms of guidance. But this transition will be a process. Taxpayers will need to continuously monitor developments and may need to adjust their approach in order to fulfill their compliance obligations and manage their risks. 

For more information, contact Mark Richards or Matt Ehinger.
 
This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.
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