Minnesota Tax Law Change May Impact Georgia Companies

The news has been filled with stories and updates about federal tax reform. The changes and saving implications for both companies and business owners are significant. However, it’s important not to forget about state tax law changes which may impact you. One such change that may impact Georgia companies recently announced was in Minnesota. Beginning July 1, 2019, Minnesota will expand its definition of a “retailer maintaining a place of business” in the state to include online marketplace providers. This means that companies that use Amazon and other third-party fulfillment companies may now have a sales tax collection responsibility. To help clients, prospects and other understand how the law may impact them, Wilson Lewis has provided a summary of key facts below.

“Marketplace Provider” Responsibility

The biggest change in the new sales tax law is how Minnesota places the onus for Minnesota tax collection directly with marketplace providers that maintain a place of business in Minnesota. A “marketplace provider” is defined as:

• Any person who facilitates a retail sale of tangible personal property, services or digital goods that are subject to tax by listing or advertising for sale those goods or services in any forum
• An entity who either directly or indirectly (through agreements or arrangements with third parties) collects payment from the customer and transmits that payment to the retailer, regardless of whether the marketplace provider receives compensation or other consideration in exchange for its services. This changes the rules for retailers that currently do not have nexus with Minnesota. They will now have nexus with the state if they use a marketplace provider that has nexus with Minnesota to make sales of tangible property, services or digital goods to customers located in the state. Once nexus is established, companies are required to register with the state, collect and remit sales tax payments on a regular basis.

Exceptions

There are a few exceptions that would make marketplace providers not responsible for collecting sales tax on behalf of third-party sellers:

• If a third-party seller already has other forms of sales tax nexus in Minnesota (i.e., a home office or business, warehouse or other physical location for distribution, sales or storage, employee, salesperson, etc.), they would still be required to register for a Minnesota sales tax permit and collect sales tax on their own.
• Retailers with Minnesota taxable sales totaling less than $10,000 annually (ending on the most recently completed calendar quarter) are exempt if their Minnesota “place of business” is solely through sales on marketplace platforms. However, if the marketplace collects the sales tax, then this exclusion does not apply, and sales tax is due on all taxable transactions.
• Any marketplace provider that does not maintain a place of business within Minnesota is also exempt.

Contact Us

While there is time until the new law goes into effect, it’s important to understand how you may be impacted. Remember that each state has different rules governing when sales, use and other taxes needed to be collected. If you have questions about the new law or need assistance with a nexus determination study, Wilson Lewis can help! For additional information, please call us at 770-476-1104 or click here to contact us. We look forward to speaking with you soon.