Alabama Updates Remote Seller Sales Tax Guidance

Most Georgia online business owners are focused on finding new ways to increase sales through expanded online advertising and marketing, identifying new product/service offerings and providing a high level of customer service. Ensuring the company is growing and increasing profits is often the main concern. The truth is that accounting issues including sales tax collection is often something that falls to the bottom of the list. However, a recent Supreme Court ruling issued in June in the case of South Dakota v. Wayfair, Inc. has changed the sales tax collection rules for these companies, known as remote sellers. The rule that a company needs to have a physical presence in a state to be required to collect sales tax was struck down. This has opened the door for states to require qualifying remote sellers to collect and remit state sales tax. Earlier this month the state of Alabama issued a notice they will begin previously issued regulations which will impact Georgia companies. To help clients, prospects and others understand the new rules and their impact, Wilson Lewis has provided a summary of key points below.

Essential Background
In 2016, the Alabama Department of Revenue, like many other states, issued regulations (rule 810-6-2-.90.03) which require out of state online retailers to assess and collect sales tax on all sales made to customers located in the state. However, the validity of the rules was in question because the Supreme Court had not heard South Dakota v Wayfair which dealt with whether states have the right to require companies without a physical presence to collect sales tax. Since the Supreme Court ruled that physical presence is no longer required this allowed Alabama, and other states, to either implement existing regulations or create new ones that align with the ruling. As a result, it was announced that effective October 1, 2018 it will begin enforcing the sales tax collection regulations issued in 2016.

Sales Tax Collection Requirements

Remote Sellers
While the regulations require remote sellers to collect sales tax, the good news is that smaller online companies are exempt from the requirement. The rule requires remote sellers with $250,000 or more in sales of tangible personal property in Alabama to collect and remit sales tax. It also requires these sellers to register for the Alabama Simplified Sellers Use Tax Program (ASST) and start the collection process no later than October 1, 2018. Remote sellers that can demonstrate that a marketplace facilitator is collecting and remitting sales tax through ASST or other sales tax will be allowed to opt out of the sales tax collection obligation.

Marketplace Facilitators
The regulations also implement a sales tax collection requirement for marketplace facilitators with in state sales exceeding $250,000 made on or on behalf of third-party sellers or comply with reporting and customer notification requirements. Qualifying facilitators must be compliant with these rules on or before January 1, 2019. In the event the facilitator will collect and remit sales tax for their sellers (as outlined above) they are required to meet the October 1, 2018 deadline or as soon as they complete the SSUT application and registration process.

Contact Us
The announcement by the Alabama Department of Revenue reflects a nationwide trend of states requiring remote sellers and other online business to collect sales tax. Given the deadline for compliance is fast approaching, it’s important to consult with a qualified advisor to determine if your business will be impacted. If you have questions about the new sales tax collection rules or need assistance with a tax compliance or planning issue, Wilson Lewis can help! For additional information please call us at 770-476-1004 or click here to contact us. We look forward to speaking with you soon.