Maryland and Indiana to tax remote sales starting October 1

Two more states are enforcing South Dakota–style economic nexus laws in the wake of the United States Supreme Court decision in South Dakota v. Wayfair, Inc., which removed the physical presence limitation preventing states from taxing remote sales. Indiana and Maryland will tax sales by businesses with substantial economic activity in the state starting October 1, 2018.

While their tax policies are the same, the circumstances in each state are different.

Economic nexus in Indiana

Indiana enacted sales tax economic nexus back in 2017. Originally set to take effect July 1, 2017, it was placed under an injunction due to a legal challenge.

Shortly after the Supreme Court removed the physical presence limitation on June 21, 2018, the Indiana Department of Revenue announced it would enforce the state’s economic nexus law starting October 1, 2018, “pending resolution of a declaratory judgment action filed in 2017.” Resolution has now occurred.

On August 27, 2018, American Catalog Mailers Association and NetChoice voluntarily dismissed their complaint against the state (hat tip to Bloomberg BNA for the court order), provided the following conditions are met:

• The Indiana Department of Revenue will not seek retroactive enforcement; economic nexus applies to transactions on and after October 1, 2018
• The minimum sales and transactions thresholds will be maintained
• The state will continue to be a full member of the Streamlined Sales and Use Tax Agreement (SSUTA), providing access to sales tax administration software to volunteer sellers (and paying for Indiana’s portion of the cost), and relieving sellers from liability for any errors attributable to the use of such software

Thus, as of October 1, 2018, a seller without physical presence in Indiana must register to do business in the state and collect and remit applicable sales taxes if in the current or previous calendar year it has:

• Gross revenue from sales into Indiana exceeding $100,000; or
• 200 or more separate transactions into the state.

Additional information is available from the Indiana Department of Revenue.

Economic nexus in Maryland

The Comptroller of Maryland responded to the Wayfair ruling rather cryptically back in July. It advised taxpayers that sell or deliver tangible personal property or a taxable service for use in Maryland to review the Wayfair decision “to identify how it affects you.” Furthermore, it explained, “If you will make sales in Maryland, you will need to obtain a sales and use tax license.”

The Comptroller has now approved an emergency economic nexus rule similar to the one adopted by South Dakota, Indiana, and dozens of other states. Effective October 1, 2018, vendors with no physical presence in the state must collect and remit tax on Maryland sales if they have either:

• Gross revenue exceeding $100,000 from the sale of tangible personal property or taxable services delivered in the state; or 
• 200 or more separate transactions of tangible personal property or taxable services for delivery into the state. 

Additional details will be available once the Comptroller publishes a tax alert on the topic.

In the meantime, you can learn more about economic nexus laws in other states at this Avalara resource page.