In the wake of the U.S. Supreme Court’s Wayfair decision, a number of states have begun imposing economic nexus standards for sales and use tax purposes. Maryland just became the latest. On August 29, 2018, the Maryland General Assembly’s Joint Committee on Administrative, Executive, and Legislative Review (AELR) approved the Comptroller of Maryland’s “emergency regulation” requiring vendors with more than $100,000 in sales or 200 or more separate transactions into Maryland to register and collect sales tax beginning on October 1, 2018. The emergency regulation will expire on March 30, 2019, at which point it must go through the normal rulemaking process, which will include a period for public comment.
Under Maryland law, to “engage in the business of an out-of-state vendor” means to sell or deliver tangible personal property or taxable services for use in Maryland. Pursuant to the statute, this includes maintaining an office or warehouse in the state, having an agent or salesman delivering or soliciting orders in the state, and entering the state on a regular basis to provide services or repairs to tangible personal property. The statute does not expressly impose an economic nexus threshold. And the regulation currently in effect mimics the definitions in the statute. In other words, engaging in the business of an out-of-state vendor under existing law arguably is limited to sellers with some physical presence in Maryland.
Comptroller Peter Franchot has been a staunch proponent of economic nexus and believes that the physical presence rule harms local Maryland businesses. In a recent interview with Reed Smith, Franchot predicted a victory for the states in Wayfair and said he “is totally in favor of a Maryland sales tax on remote sellers,” and that “Wayfair and all these other people need to do the right thing” and collect and remit sales tax.