Savvy tax professionals know about “Amazon” laws, which states passed to expand nexus in order to tax goods sold over the internet. In addition to legislation to expand nexus, states are proactively defending the expanded nexus and spending millions to enforce these laws.
Here’s a look at the states’ aggressive enforcement plans:
Massachusetts published Directive 17-1: Requirement that Out-of-State Internet Vendors with Significant Massachusetts Sales Must Collect Sales or Use Tax. Issued April 1, 2017, the directive, in great legal detail, heads off possible claims that an online seller does not have physical nexus by pointing to an internet seller’s use of physical “cookies” left on people’s computers. The rationale defines these “cookies” as software, thus proving physical nexus and triggering sales tax.
A proactive defense such as this one will likely be adopted by many states to prevent the need to defend the expanded nexus in court.
Several states are also dedicating resources to enforcement. Wisconsin has significantly increased the number of state auditors. The focus of these additional positions will be on corporate and sales tax collections with a target of collecting $64 million over two years.
In 2016, Oklahoma approved funding to add 33 new auditors, on top of the 20 previously hired, to discover and expose fraud and abuse of sales and use tax exemptions. The state is targeting an increase of more than $26 million in sales tax revenues.
These efforts are just a small glimpse into states’ efforts to defend and enforce expanded sales and use tax laws. Learn more about what states are doing in our white paper, What You Need to Know about the Increasingly Aggressive Sales Taxation of E-Commerce.