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:
- 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.
Colorado’s Notice and Reporting Requirement Laws Explained
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Colorado’s Notice and Reporting Law Threshold |
Colorado’s Notice and Reporting Requirements state that any retailer who is not based in Colorado and does not collect sales tax (even if they don’t have sales tax nexus) must notify their customers of their obligation to pay Colorado use tax, and report their customers’ sales to the Department of Revenue.. |
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Colorado’s Notice and Reporting Law Effective Date |
Colorado’s Notice and Reporting Law went into effect 7/1/2017, however the requirements have been amended over the years. The current version is based on changes in May of 2018. |
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Colorado’s Notice and Reporting Law Requirements |
Retailers selling to Colorado residents that don’t collect sales tax must do all of the following:
Alternatively, you can voluntarily register to collect and remit Colorado sales tax. |
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Colorado’s Notice and Reporting Law Penalties |
Failure to provide a Transactional Notice at the time of sale results in a penalty of $5 each sale up to a maximum of $25,000. Failure to provide an Annual Purchase Summary of Colorado Purchases results in a penalty of $10 per customer for each missing summary. Failure to provide an Annual Customer Information Report results in a penalty of $10 for each Colorado purchaser up to $50,000. |
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. |
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. |
Oklahoma: As of November 2019, Notice and Reporting requirements were repealed for Remote Sellers in Oklahoma and instead default to economic nexus provisions. Marketplace facilitators and referrers are subject to state tax at a lower threshold ($10K). You can find more information in Oklahoma’s tax statutes.
Pennsylvania: As outlined in Sales and Use Tax Bulletin 2019-01, the requirement to collect Pennsylvania’s sales tax is expanded to include businesses making at least $100,000 in annual Pennsylvania gross sales. Act 13 of 2019 has codified this rule, and removed the election and reporting requirements for sellers located outside of Pennsylvania.
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