Since the United States Supreme Court’s decision in South Dakota v. Wayfair, 585 U.S. ___ (2018), on June 21, 2018, state governments have been rapidly rewriting their rules to impose economic nexus (as opposed to physical presence) standards for sales and use taxes. At present, 43 states have implemented Wayfair-inspired rules. In the past six months, New York has been busy updating its own laws.

Interestingly, New York had its own sales tax economic nexus rule for remote sellers of tangible personal property in place prior to the Wayfair case, but it was seemingly dormant until the physical presence rule established in Quill Corp. v. North Dakota,504 U.S. 298 (1992), was overturned by Wayfair. Under New York’s remote seller rule, a business that had no physical presence in New York but had made more than $300,000 in sales of tangible personal property delivered in the state andconducted more than 100 sales of tangible personal property delivered in the state in the immediately preceding four sales tax quarters would be required to register as a sales tax vendor. In January 2019, New York issued Notice N-19-1 announcing this rule, which was effective immediately.

As discussed in the authors’ June 2019 column addressing New York’s 2020 Budget (“Tax Changes in the 2019/2020 New York State Budget,”, New York further imposed sales tax economic nexus requirements upon marketplace facilitators and remote sellers. Under the budget, a person is not a marketplace provider if it lacks physical presence and for the immediately preceding four quarters can demonstrate that the cumulative total gross receipts of sales it made or facilitated in New York did not exceed $300,000 or that such person had not made or facilitated more than 100 sales in the state. The marketplace provider rules became effective June 1, 2019.

On May 31, New York issued Technical Guidance TSB-M-19(2)S, which set forth New York’s policy with respect to the new marketplace provider rules. Under the guidance, and similar to the budget, a person with no physical presence in New York that facilitates sales for marketplace sellers is required to register as a vendor if in the prior four quarters the cumulative total gross receipts from sales made or facilitated of tangible personal property delivered into the state exceeded $300,000 and that person made or facilitated more than 100 sales delivered into the state.

Note that the test in the budget is phrased in the negative and uses “or” ($300,000 or 100 transactions), while the test in the guidance is phrased in the positive and uses “and.” Grammar aside, the test in New York in both cases is in fact an “and” test, which the authors note is unlike many other states, which employ a true “or” test.

On June 23, New York passed legislation [Senate Bill 6615 (Part J)] increasing the threshold from $300,000 to $500,000 for both remote sellers and marketplace providers. Accordingly, at least as of now, both remote sellers and marketplace providers of tangible personal property have nexus in New York for sales and use tax purposes, without a physical presence, if they have greater than $500,000 in New York sales and greater than 100 New York transactions.

New York’s sales tax rules in this area are complex, and CPAs need to be aware of these rules in order to properly advise their clients of potential sales tax filing and registration requirements.

Corey L. Rosenthal, JD is a principal and the state and local tax practice leader at CohnReznick LLP, New York, N.Y.
Lance E. Rothenberg, JD, LLM is a senior manager at CohnReznick LLP, Roseland, N.J.