Following the Supreme Court’s June decision in the Wayfair case allowing states to collect sales and use taxes on purchases made online, the Comptroller’s office swiftly submitted draft emergency regulations providing a conceptual framework for what would trigger collection of such taxes here in Maryland. The regulations could take effect as early as the end of this month.
The regulations would subject online sales transactions to the State’s 6 percent sales and use tax if the sale is made by a retailer who, either within the previous or current calendar year, made at least 200 sales transactions within the state, or the retailer earned at least $100,000 in gross revenue on sales in Maryland.
South Dakota v. Wayfair – a much-followed case by jurisdictions depending on sales tax revenue for their general funds – overturned Quill Corp. v. North Dakota. In Quill, the Supreme Court held that states cannot require retailers with no in-state physical presence to collect sales tax. Now, they can – but first, states must enact regulations similar to North Dakota’s in order to ensure that tax collections and remittance are not overly burdensome on retailers.
The Comptroller’s Office indicated that they “looked … very carefully” at the North Dakota regulations first.
The State’s head tax collector filed both emergency and proposed regulations with the General Assembly’s Joint Committee on Administrative, Executive, and Legislative Review (AELR), which reviews draft regulations for conformity with statutory authority and legislative intent.
Emergency regulations bypass the normal public notice and comment period, and only remain in effect for 180 days or less, to provide time for the regulating agency to submit regular proposed regulations. Emergency regulations are not published in the Maryland Register before adoption, like regular proposed regulations are. However, notice of AELR’s receipt of the draft emergency regulation are posted on the Maryland General Assembly website. In addition, the requesting agency must post the draft regulations on its website within three business days of submission to the committee.
If an AELR member requests a public hearing on the emergency adoption of a regulation, the committee must hold the hearing. If no member makes such a request, committee staff may “poll on the emergency regulation” 10 business days after the draft’s receipt, and it takes effect at that time.
The regulations could result in the State’s General Fund receiving a significant, yet indeterminable, influx of funds. A recent Department of Legislative Services analysis estimated that uncollected sales taxes from remote sales to Maryland residents (including online sales, as well as catalog and mail order sales) could have totaled approximately $320 million in fiscal 2017.