Vermont might give all remote sellers sales and use tax duties, including online vendors that sell to Vermont customers. Legislation introduced in the House of Representatives would require online vendors to elect to:
- collect sales tax in Vermont; or
- give purchasers use tax liability notices and file a copy of those notices with the Department of Taxes.
Specifically, the bill, which was introduced in the House of Representatives, would apply to “remote vendors” and “marketplace facilitators”.
The gross receipts threshold requirement for election is the same for:
- remote vendors; and
- market facilitators
A remote vendor would have to make the election if its gross receipts from retail sales into Vermont are at least $10,000 during the current or prior calendar year.
In addition, a marketplace facilitator would have to make the election if its gross receipts from retail sales into Vermont are at least $10,000 during the current or prior calendar year. This would include gross receipts from:
- the facilitator’s own sales, and
- the sales of contracting vendors or remote vendors through the marketplace.
The notice requirements for remote vendors and marketplace facilitators would be similar to notice requirements currently imposed on noncollecting vendors. Generally, noncollecting vendors must notify certain purchasers that sales or use tax is due on nonexempt purchases they make from the vendor. Noncollecting vendors must also file with the Department of Taxes a copy of the notice they are required to provide to purchasers.
For remote vendors and marketplace facilitators, the notice would have to be sent to purchasers who have made $200 or more of purchases in the prior calendar year. Currently, noncollecting vendors must notify purchasers who have made $500 or more of purchases in the prior calendar year.
Tax Collection Requirements
A person who elects to collect tax under the election provision would be considered a “person required to collect tax.”
A marketplace facilitator would have to collect tax on retail sales it makes on behalf of a vendor.
Also, a marketplace facilitator that has elected to comply with the notice requirements would still have to collect and remit sales or use tax on:
- its own sales it makes as a vendor, and
- sales it makes on behalf of vendors.
When collecting tax on these sales, the marketplace facilitator would not send the notices to purchasers or file a copy with the Department of Taxes. In addition, it would not include the sales in the total purchases listed in the notices. However, these sales would be counted when determining whether the notice requirements apply.
In addition, the bill defines terms used in the proposed requirements.
“Remote vendor” would mean a person who is subject to Vermont sales tax as a “vendor” except that a remote vendor is located outside Vermont. This definition would replace the definition of “noncollecting vendor.”
“Marketplace facilitator” would mean a person who contracts with vendors and/or remote vendors to facilitate the sale of the vendors’ or remote vendors’ products through a marketplace operated by the person. A marketplace facilitator would engage in certain activities for the vendors, including:
- payment processing services;
- fulfillment or storage services;
- listing products for sale;
- setting prices;
- branding sales as those of the marketplace facilitator;
- order taking;
- advertising or promotion;
- providing customer service; or
- accepting or assisting with returns or exchanges.
A marketplace facilitator would also engage in:
- communicating the offer or acceptance between purchasers and vendors or remote vendors;
- owning or operating the electronic or physical infrastructure or technology that brings purchasers and vendors or remote vendors together;
- providing a virtual currency that purchasers use to purchase products from vendors or remote vendors; or
- software development or research and development activities related to any of the activities described above (payment processing, fulfillment, etc.), if these activities are directly related to a physical or electronic marketplace operated by the person or an affiliated person.
The marketplace facilitator may engage in these activities directly or indirectly through one or more affiliated persons.
“Marketplace” would mean the physical or electronic processes, systems, places, and infrastructure through which a marketplace facilitator engages in activities for vendors. “Marketplace” would include a website.
“Affiliated person” would mean a person who, with respect to another entity:
- has more than 5% ownership interest in the other entity;
- is related to the other entity because a third entity holds more than 5% ownership interest in the related entities; or
- is related to the other entity because a group of third entities who are affiliated with respect to each other hold more than 5% ownership interest in the related entities.
H.B. 587, as introduced in the Vermont House of Representatives on January 9, 2018