Wisconsin Indicates Plans to Begin Requiring Remote Sellers to Collect Sales Tax on October 1, 2018

Another state has been heard from in the aftermath of the Supreme Court’s decision in Wayfair v. North Dakota.  Wisconsin’s Legislative Fiscal Bureau has published a memorandum issued to the members of the Wisconsin Legislature (Memorandum: South Dakota v. Wayfair, Inc. - Sales and Use Tax Collections on Remote Sales) that implies that Wisconsin’s Department of Revenue is aiming for an October 1, 2018 start date for collecting sales tax from remote sellers.

Tax Analysts, in their story in State Tax Today covering this memorandum, reported that Wisconsin Governor Scott Walker’s press secretary, Amy Hasenberg, confirmed the October 1 beginning date for the state to start requiring out of state sellers to collect and remit the tax.

The memorandum estimates the impact of collecting the tax from out of state sellers as follows:

Based on information supplied by DOR and the U.S. Census Bureau, it is estimated that expanding sales and use tax collection obligations to out-of-state vendors in compliance with the Wayfair decision would increase state sales and use taxes by $120 million on an annual basis. This estimate is expressed in 2018-19 dollars and assumes Wisconsin would utilize a safe harbor provision for remote sellers similar to the economic thresholds enacted by South Dakota. If changes were made to the administrative code or the statutes such that DOR could extend nexus to remote sellers beginning October 1, 2018, it is estimated that state sales and use tax revenues would increase by $90 million in 2018-19 and $120 million in 2019-20. Further, it is estimated that county and professional stadium park district sales and use tax collections would increase by $7.7 million in 2018-19 and by $10.3 million in 2019-20.

Wisconsin’s law does not currently impose a physical presence requirement for sales tax nexus and the state is a member of the Streamlined Sales and Use Tax Agreement.  But the memorandum points out one challenge for Wisconsin that may complicate trying to use the Wayfair decision to justify collecting the tax:

Current Wisconsin Law. Because Wayfair overturned Quill’s physical presence requirement, the manner in which state law is “otherwise limited by federal law” has been modified with regard to extending nexus to remote out-of-state sellers. DOR indicates that current law now requires it to begin collecting tax on remote sales. However, unlike South Dakota, the Wisconsin statutes do not specifically provide for an electronic nexus threshold. Therefore, it is unclear that requiring out-of-state vendors to collect tax without changes to the statutes or administrative code would comport with the Complete Auto test. DOR is currently reviewing this issue.

Advisers working with taxpayers who have sales into Wisconsin will need to watch these developments carefully.  Certainly, those sellers that would have sales in excess of the South Dakota thresholds ($100,000 of annual sales or 200 transactions in a year) should begin planning to comply with a likely Wisconsin demand for collection if they are not already doing so beginning on October 1, 2018.

[1] Andrew Breiner, “Wisconsin to Begin Collecting Sales Tax From Remote Sellers”, State Tax Today, July 5, 2018, 2018 STT 129-1