Pub. 9 2019 Issue 1

9 200 or more separate transactions, within 1 year, to collect and remit sales taxes in South Dakota. In overturning the prior physical presence standard, the Wayfair Court did not prescribe a new standard for which a state could impose nexus on retailers. Accordingly, several states, including Illinois, have enacted or are considering enacting some formof the SouthDakota law adopting a threshold for establishing nexus to collect sales and use taxes from out-of-state sellers. Retailers, including motor vehicle dealers who sell vehicles and parts to out-of-state residents – especially given the prevalence of internet sales – should consider instituting internal controls to gauge sales activity to determine the filing requirements and assess the need for registration in these other states that have enacted threshold nexus laws for collection of sales and use taxes. For example, under the Wayfair decision, considerations arise for dealers whose sales activity in a particular state exceeds that state’s enacted gross revenue threshold based on a single or separate transaction(s) thereby establishing nexus. This may include both vehicles and parts sales, necessitating the monitoring of transactional amounts, for example, of such properties sold to customers in certain states where such nexus laws have been enacted. Dealers should also be wary that states which have enacted the nexus threshold may not differentiate between retail and wholesale sales to determine gross revenue or transactional activity in finding nexus exists. Dealers effecting the sale of vehicles or parts in other states to out-of-state residents should reviewwith their attorneys or tax advisors their vehicle and parts sales (to other states) to assess their liability. The determination of nexus and filing obligations in a given state is separate from the determination of taxability. Importantly, establishing nexus may result in all out-of-state transactions of the sale of tangible personal property (vehicles and parts) into that state, subjecting the dealer to that state’s tax collection obligations. Dealers should undertake review of the Wayfair ruling and its impact on vehicle and parts sales. For example, there are various ways a transaction takes form when a dealer sells a vehicle to a customer residing in another state. The differences between drive-away possession and dealer- or customer-arranged delivery of vehicles sold out-of-state to purchasers, may affect the applicability of threshold nexus requirements. Dealers who sell parts out-of-state should also evaluate other states’ threshold nexus laws to determine liability and consider instituting internal policies to closely tally total sales revenue of vehicle and parts as well as number of sales transactions to be able to know whether they exceed the nexus thresholds of a destination state. And in that instance, the dealer should assess further its obligations for registration and tax collection compliance in that state. In summary, dealers should consult with experienced counsel or tax advisors who can assist in advising about newly enacted threshold nexus laws of other states for the collection of sales and use taxes. This will assist dealers with important determinations of registration and compliance, as well as, liability.  Julie A. Cardosi is Principal of the private firm, Law Office of Julie A. Cardosi, P.C., of Springfield, Illinois. She has practiced law for over 30 years,andrepresentsthebusiness interestsoffranchisedmotorvehicle dealers throughout Illinois. Formerly in-house staff legal counsel for the Illinois Automobile Dealers Association, she concentrates her private practice in the areas of dealership compliance matters, including advertising,transfersofownership,mergersandacquisitions,franchise law, commercial real estate transfers, and other areas impacting day-to-day dealership operations. She has also served as former Illinois Assistant Attorney General and Deputy ChiefoftheConsumerFraudBureauoftheAttorneyGeneral’sOffice.Thematerialdiscussed inthisarticleisforgeneralinformationonlyandisnotintendedaslegaladviceandshouldnot beacteduponassuch.Dealersshouldconsulttheirownprivate legalcounselforapplication to their specific circumstances. For more information, Julie can be reached at jcardosi@ autocounsel.com , or at 217-787-9782, ext. 1. Dealers should undertake review of the Wayfair ruling and its impact on vehicle and parts sales. For example, there are various ways a transaction takes form when a dealer sells a vehicle to a customer residing in another state. The differences between drive-away possession and dealer- or customer-arranged delivery of vehicles sold out-of-state to purchasers, may affect the applicability of threshold nexus requirements.