Mixed Messages on Arkansas Implementation of Wayfair for Remote Sellers

While there have been no fundamental changes since our prior post on the state's options for taking advantage of Wayfair's termination of the physical presence nexus rule, evolving discussions and inconsistent guidance warrant an update:  State leaders are still evaluating their options and appear to be leaning toward legislation in the 2019 legislative session.  Meanwhile, informal DFA interim guidance may be misleading in indicating that remote sellers "should collect" tax absent a change in statute or regulations.

As explained in the prior post, Arkansas's tax statutes do not address the degree of connection to impose a tax collection obligation.  The state's adoption of a physical presence standard was done through regulation in the definition of a "vendor" required to collect use tax.  Changing either the rule or the statute would appear to be a viable way for the state to adopt South Dakota-style economic nexus thresholds.  At this time the legislative approach seems to be preferred, and the Bureau of Legislative Research has indicated that it believes a legislative change is needed.  Such legislation likely would be introduced early in the legislative session that begins in January 2019.  It may be part of a Tax Reform and Relief Legislative Task Force recommendations bill.

Meanwhile the Department of Finance and Administration has set up an interim guidance webpage for remote sellers.  Providing interim guidance is admirable, and DFA deserves credit for doing so.  One piece of guidance however seems potentially confusing.  In the Q&A for remote sellers, DFA indicates a binding tax collection obligation directly as a result of Wayfair:

How are remote sellers that are already registered in Arkansas affected by the Wayfair decision?
The effect of the United States Supreme Court's decision in South Dakota v. Wayfair, Inc., on June 21, 2018, is that an out-of-state seller with no physical presence in Arkansas (i.e., remote seller) should collect and remit Arkansas sales or use tax on taxable sales in Arkansas. More details are below.

Based on other statements from DFA and BLR (including in connection with the Tax Reform Task Force), this appears to be more of an aspirational statement rather than an indication of planned enforcement efforts by the state against non-physical-presence remote sellers under the existing legal framework.


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