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North Dakota Eliminates Remote Seller Transactions Threshold

POSTED ON Mar. 19, 2019

North Dakota has eliminated the transactions threshold from its remote seller law.

Under S.B. 2191, signed into law March 14 by Gov. Doug Burgum (R), a remote seller without a physical presence in North Dakota is required to collect and remit taxes on sales made into the state once the seller's gross sales in the state exceed $100,000. The new law also requires a seller to obtain a permit during the following calendar year or 60 days after the threshold is met, whichever is earlier. The law is retroactive to tax years beginning on or after January 1, 2019. 

Under prior law, a seller was required to collect and remit sales taxes once it reached the $100,000 threshold or a 200-transactions threshold. The amended law aligns with the general consensus among states and industry leaders participating in a Multistate Tax Commission work group, most of whom have said they would prefer a sales-volume-only threshold for establishing economic nexus.

A white paper issued by the work group in November 2018 included comments from several participants calling for a sales-volume-only threshold. Sylvia Dion of PrietoDion Consulting Partners LLC said she represents international remote sellers who reach the 200-transactions threshold on $5,000 or less in sales. Paul Rafelson of the Online Merchants Guild and Diane Yetter of the Sales Tax Institute also called for elimination of the transaction threshold.

The North Dakota tax commissioner’s office announced in February that over 2,500 remote sellers have registered to collect sales tax and that collections from them have exceeded $5 million.

Burgum also signed into law H.B. 1214, which amended the state’s three-person membership on the Streamlined Sales Tax Governing Board to include the tax commissioner, a member appointed by the House majority leader, and a member appointed by the Senate majority leader.

The state is also considering enacting marketplace facilitator legislation (S.B. 2338) that would make a facilitator the retailer of each sale on its platform, including platforms that provide customer service, fulfillment or storage, product listing, price setting, branding, order taking, advertising, or payment processing. According to the bill, payment processors whose "sole activity . . . is to handle transactions between two parties" would not be considered marketplace facilitators.

Under the bill, a marketplace facilitator and a seller would be considered affiliated if either owns more than 5 percent of the other or if both entities are "subject to the control of a common entity" owning more than 5 percent of the facilitator and the seller. The law would also protect facilitators from class action lawsuits by purchasers for the overpayment of sales taxes.

S.B. 2338 passed the Senate on a 44–2 vote February 1. The House Finance and Taxation Committee on March 14 reported the bill as "do pass," and the bill received a 74–18 approval March 18 by the full House on its second of three readings before final action by that chamber.