Kentucky Department of Revenue Collection of Sales Tax from E-Commerce Retailers and Impact on Other States

Issue

The Kentucky Department of Revenue (DOR) issued a release on the state’s recently enacted sales tax nexus economic thresholds.  Consequently, this release follows the decision in South Dakota v. Wayfair, Inc., U.S. Supreme Court, Docket No. 17-494, June 21, 2018,

The Wayfair decision held that physical presence in a state is not required to establish sales tax nexus.  This decision overrules Quill Corp. v. North Dakota, United States Supreme Court, 504 U.S. 298, 112 S.Ct. 1904 (1992). As a result, the DOR points out that the thresholds enacted in recent Kentucky legislation are the same as those at issue in Wayfair.  Most noteworthy is that physical presence is not required.

Therefore, the Kentucky law requires remote retailers to collect Kentucky sales and use tax if:

• gross receipts from Kentucky sales exceeded $100,000 in the previous or current calendar year; or
• there were at least 200 separate in-state sales transactions of property in the previous or current calendar year.

Impact

Similarly, it is expected that all other states that impose a sales tax will follow suit.  However, each state may enact different effective dates for their respective changes.  Furthermore, these will likely have differing thresholds for applicability.

The effective date of the Kentucky bill is July 1, 2018.