States Where Sales Tax Notice and Reporting Requirements Still Matter (Regardless of Economic Nexus Thresholds)

by | May 5, 2020

Summary: Even if your business has not crossed economic nexus thresholds, some states have sales tax Notice and Reporting Requirements with significant penalties. You can protect your business by registering for a sales tax permit if you’ve crossed the Notice and Reporting Requirements, but have not crossed the state’s economic nexus thresholds. 

What Are Notice and Reporting Requirement Laws?

Before Economic Nexus existed, Notice and Reporting Requirement Laws were extremely popular with states because it allowed states to “force” businesses to register for sales and use tax permits without violating existing federal and constitutional rules regarding interstate commerce. 

Notice and Reporting Requirement Laws work something like this: If your business has a certain level of sales in a state and you are not charging your customers’ sales tax, you can either: 

  1. Notify each and every one of your purchasers of their obligation to voluntarily pay use tax on the purchase, and provide a report to the state with a list of your customers and their purchase history (an extremely arduous, if not impossible, task!)

OR…

2. Simply register for a sales/use tax permit in the state. 

If businesses neither registered for a sales tax permit nor complied with the laws, they could be subject to substantial fines. 

Many businesses were not keen to comply with these Notice and Reporting Requirements because they were difficult to deal with, and also provided states with significant information about their customers (which many watchdog groups deemed a privacy violation).

 

Aren’t Notice and Reporting Requirements a Thing of the Past?

When states began passing economic nexus laws, many states got rid of their old Notice and Reporting Requirement laws because they didn’t need the Notice and Reporting Laws anymore. They figured that if states were registering to pay sales tax, that was good enough. 

And in most states, if they did not get rid of the law entirely, they revised the Notice and Reporting Requirement threshold so that it aligned with economic nexus laws. So for the most part, we don’t need to worry about Notice and Reporting Requirement Laws… 

except in a few very important states. 

These are states that still have the laws on the books and their threshold for enforcing Notice and Reporting Requirements are substantially lower than their economic nexus threshold. 

You need to pay careful attention to the following states (even if you haven’t crossed their economic nexus thresholds) and either comply with their Notice and Reporting Requirements or get a sales tax permit.

Free State Audit Risk Guide

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Colorado’s Notice and Reporting Requirement Laws

Colorado’s Notice and Reporting Law Threshold Colorado’s Notice and Reporting Requirement threshold is $100,000 worth of Total Gross Sales in Colorado during the prior calendar year. Please note that this is different from Colorado’s economic nexus threshold which is based on retail sales.
Colorado’s Notice and Reporting Law Effective Date 7/1/2017
Colorado’s Notice and Reporting Law Requirements

To comply with Colorado’s Notice and Reporting Law Requirement you must provide notice to the customer of their obligation to pay use tax at the time of sale, send a notice to every seller each year that they have a use tax obligation, and send a list of customers to the state of Colorado. 

Alternatively, you can voluntarily register to collect and remit Colorado sales tax. 

Colorado’s Notice and Reporting Law Penalties If a Non-Collecting Retailer fails to file the Annual Customer Information Report in Colorado or files an incomplete Annual Customer Information Report, the Non-Collecting Retailer shall pay a penalty equal to $10 for each Colorado Purchaser that should have been included in the Annual Customer Information Report, but was not included. More information on penalties for Colorado’s Notice and Reporting requirements can be found in the original statute text here.

 

Louisiana’s Notice and Reporting Requirement Laws

Louisiana’s Notice and Reporting Law Threshold Louisiana’s Notice and Reporting sales threshold is $50,000 in total sales for the current or prior calendar year.
Louisiana’s Notice and Reporting Law Effective Date 7/1/2017
Louisiana’s Notice and Reporting Law Requirements

To comply with Louisiana’s Notice and Reporting Law Requirement you must provide notice to the customer of their obligation to pay use tax at the time of sale, send a notice to every seller by January 31st of each year that they have a use tax obligation, and send a list of customers to the state by March 31st. 

Alternatively, you can voluntarily register to collect and remit Louisiana sales tax. 

Louisiana’s Notice and Reporting Law Penalties Penalties are not publicly available or published by the Department of Revenue, however broad enforcement powers have been granted to the agency. We expect enforcement to be heavy.

 

Oklahoma’s Notice and Reporting Requirement Laws

Oklahoma’s Notice and Reporting Law Threshold Oklahoma’s Notice and Reporting sales threshold is $10,000 in taxable sales through all channels (including marketplaces) for the previous 12 months.
Oklahoma’s Notice and Reporting Law Effective Date 7/1/2018
Oklahoma’s Notice and Reporting Law Requirements

To comply with Oklahoma’s Notice and Reporting Law Requirement you must post a conspicuous notice on the sales platform notifying the customer that they have a use tax obligation, provide a notice of their obligation at the time of sale, send a notice to every seller by January 31st, and provide the state with a list of all of last year’s customers by January 31st.

If a seller is making all of their sales on a marketplace facilitating sales tax, then complying with notice and reporting requirements is not required.

Alternatively, you can voluntarily register to collect and remit Oklahoma’s sales tax

Oklahoma’s Notice and Reporting Law Penalties The penalties for not complying with Oklahoma’s Notice and Reporting Requirements is the lesser of a minimum of $20,000 or 20% of the previous 12 months sales. 

Pennsylvania’s Notice and Reporting Requirement Laws

Pennsylvania’s Notice and Reporting Law Threshold Pennsylvania’s sales threshold is $10,000 in retail sales for the preceding twelve-calendar months.
Pennsylvania’s Notice and Reporting Law Effective Date March 1st, 2018
Pennsylvania’s Notice and Reporting Law Requirements

Pennsylvania’s Notice & Reporting Law states that any remote seller or marketplace facilitator that is not required to collect and remit sales tax to Pennsylvania and does not meet or exceed the economic nexus threshold of $100,000 in gross sales in the previous twelve months or have a physical presence in the state, may be responsible for Notice and Reporting requirements. Sellers who must comply with Notice and Reporting have retail sales of greater than $10,000 during the immediately preceding twelve-calendar months must do the following:

 

  1. Post a notice on your website to inform Pennsylvania buyers that intend to purchase for delivery, that sales and use tax may be due.
  2. Provide a written notice to your Pennsylvania purchaser at the time of each sale.
  3. By January 31 of each year, you must provide a written report to the Department of Revenue.

Alternatively, you can voluntarily register for a Pennsylvania sales tax permit.

Pennsylvania’s Notice and Reporting Law Penalties Penalties for failure to comply are $20,000 or 20% of total sales during the previous twelve months, whichever is less, against a remote seller, marketplace facilitator or a referrer that makes an election.

Puerto Rico’s Notice and Reporting Requirement Laws

Puerto Rico’s Notice and Reporting Law Threshold Puerto Rico’s Notice and Reporting sales threshold is $0 (so a single sale can create a reporting obligation).
Puerto Rico’s Notice and Reporting Law Effective Date 7/1/2017
Puerto Rico’s Notice and Reporting Law Requirements

To comply with Puerto Rico’s Notice and Reporting Law Requirement you must notify the buyer on their invoice or receipt that they need to pay tax directly to the government, provide a quarterly report to Puerto Rico with a list of all purchases made by residents, and provide an annual notice to purchasers each year, and provide the Treasury with a copy of each notice.

Without a physical presence in Puerto Rico, you cannot get a sales tax permit instead of complying with Notice and Reporting requirements.  

Puerto Rico’s Notice and Reporting Law Penalties The penalty for not complying with Puerto Rico’s Notice and Reporting Requirements is $100 for each transaction. Failure to file a quarterly report is $5,000 for each failure. And failure to file the annual report is $500 for each failure.

Vermont’s Notice and Reporting Requirement Laws

Vermont’s Notice and Reporting Law Threshold Vermont’s Notice and Reporting sales threshold is $0, meaning you have a reporting obligation the first time you make a sale.
Vermont’s Notice and Reporting Law Effective Date 7/1/2017
Vermont’s Notice and Reporting Law Requirements

To comply with Vermont’s Notice and Reporting Requirement, you must provide notice to customers that they owe use tax at the time of sale, send a notice to every seller annually to all purchasers with more than $500 in sales, and provide a list to the states each year of customers that have purchasers larger than $500 (only sellers that have more than $100k in sales per year need to submit this annual report).

If a seller is making all of their sales on a marketplace facilitating sales tax, then complying with notice and reporting requirements is not required.

Alternatively, you can voluntarily register to collect and remit Vermont sales tax

Vermont’s Notice and Reporting Law Penalties The penalty for not complying with Vermont’s Notice and Reporting Requirements is $5 for each failure to provide notice at the time of sale, and $10 for each failure relating to notifying the customer or state annually. 
Disclaimer: Our attorney wanted you to know that no financial, tax, legal advice or opinion is given through this post. All information provided is general in nature and may not apply to your specific situation and is intended for informational and educational purposes only. Information is provided “as is” and without warranty.

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