New York just (January 15, 2019) posted a notice on their website that they’ve had an economic nexus law all along. And, guess what? It's been effective ever since the Wayfair decision was announced.
Here's what they said on their website: On June 21, 2018, the United States Supreme Court ruling in South Dakota v. Wayfair (138 S.Ct. 2080 ) eliminated the prohibition on a state imposing sales tax collection responsibilities on businesses that have no physical presence in that state. Due to this ruling, certain existing provisions in the New York State Tax Law that define a sales tax vendor immediately became effective. Businesses that fall within this definition and make taxable sales in New York State are required to collect and remit New York State and local sales tax.
What's a Vendor?
The term vendor includes a person who regularly or systematically solicits business in New York State by any means and by reason thereof makes taxable sales of tangible personal property to persons in the state. A person is presumed to be regularly or systematically soliciting business in the state if, for the immediately preceding four sales tax quarters:
- the cumulative total of the person's gross receipts from sales of tangible personal property delivered into the state exceeded $300,000, and
- such person made more than 100 sales of tangible personal property delivered in the state.
Notice the NY test is NOT and Either/Or test like it is in most other states. In NY , your client must have more than $300K in sales AND more than 100 transactions. That's one slightly good thing about NY compared to other states.
Here's what NY says businesses should do next:
Therefore, a business that has no physical presence in New York State but meets the requirements outlined above must register as a New York State vendor. Such business is required to register as a vendor immediately if it has not already done so...
That's It! No Grace Period...
Most states allowed some grace period when they announced their policies vis-a-vis Wayfair. After all, this is a big change and businesses need some time to get their tax collection systems up and running. But not New York. But it gets even worse...
Should Your Client Register Immediately? Maybe Not...
This is where things get a little dicey, as I see it. I know they said that businesses who meet the definition of a "Vendor" as defined above should register immediately, but what about the periods between now and June 21, 2018.
Did You Notice When They Said the Law Became Effective?
Go back up to the first paragraph and notice this: "Due to this ruling (Wayfair), certain existing provisions in the New York State Tax Law that define a sales tax vendor immediately became effective. Wait, the Wayfair decision was effective June 21, 2018, so that means the 'dormant' NY statutes would also have become effective as soon as it was constitutionally allowable. And don't look now, but the Supreme Court does not make prospective-only decisions. As was mentioned in the oral arguments, once the Supreme Court says the commerce clause means X, then it always means X, not just in the future. Statutes can be implemented on a go-forward basis, but interpretations like in the Wayfair case are not time bound. So NY may be looking to impose its economic presence standards back to June 2018, and might not be barred from going back even further.
Would New York Do Such a Thing to Business?
History shows that they will. Absolutely. Look at what they did very publicly to Sprint, My Pillow, and others. And it might not be the sales tax auditors that initiate the actions. It could very well be done by "whistleblowers" anxious to cash in on the 25% bounties offered by the state. They would get the ball rolling and then involve the state's Attorney General. This could be a nightmare in the making.
For More on This, Check out Our Podcast on the New York Sales Tax Breaking News.