Gov. Scott Walker has approved a Department of Revenue (DOR) scope statement amending rules related to the collection of online sales taxes. The rule will allow DOR to collect Wisconsin’s 5 percent sales tax from online sellers without a physical presence in the state beginning on Oct. 1, 2018. The scope statement says the rule will include an exception for sellers with less than $100,000 in sales or less than 200 transactions in the state.
The Legislative Fiscal Bureau has estimated that collecting online sales tax would increase sales and use tax revenue by $120 million annually. A state budget provision in 2013 provided that any additional revenue resulting from changes to federal law regarding online sales taxes must be used to offset income tax reductions. The statute requires DOR to analyze revenue from the first 12 months of sales tax collection before administering income tax reductions, so DOR could implement income tax changes as early as 2020.
The scope statement comes after the U.S. Supreme Court ruled in June in South Dakota v. Wayfair that states may collect online sales tax from sellers with no physical presence in the state. The Wayfair decision overturned Quill Corp. v. North Dakota, which held that states can only collect sales and use tax from retailers with a physical presence in the state. Before Wayfair, states relied on consumers purchasing from out-of-state, online retailers to self-report use tax. Since self-reporting is difficult to enforce, it was estimated that states missed out on significant revenue from online sales.