Key takeaways
- California approved new digital tax legislation:
- SB 1327 introduces a 7.5% tax on gross receipts from data extraction for large online platforms.
- AB 886 requires major digital platforms to compensate journalism providers or enter arbitration over advertising-based payments.
- North Carolina removed its 200-transaction threshold — remote sellers and marketplace facilitators now only need to collect tax if sales exceed $100,000.
- Vermont will now tax Software-as-a-Service (SaaS) as tangible personal property starting July 1, 2024.
- These changes reflect growing U.S. efforts to modernize tax laws for the digital economy, ensuring compliance for large tech firms and remote sellers.
Several new tax laws have been passed in California, North Carolina, and Vermont, bringing significant changes for digital businesses and remote sellers. These legislative updates aim to address the evolving digital economy and ensure proper tax compliance.
California Senate Approves Digital Tax Bills
On June 27, 2024, the California Senate approved SB 1327, imposing a 7.5% tax on gross receipts from data extraction transactions. This tax applies to online platforms with annual gross receipts of $2.5 billion or more when they sell user information or advertising.
AB 886 was amended and passed by the Senate Judiciary Committee on June 26, 2024, then sent to the Appropriations Committee. The bill requires covered platforms—those with net annual sales or market capitalization over $550 billion, or more than one billion monthly active users—to either compensate digital journalism providers annually or participate in arbitration to determine payments based on advertising revenue. The definition of "covered platform" now excludes companies earning less than 50% of their annual revenue from online platforms, advertising, and search services.
North Carolina Removes Remote Seller Transaction Threshold
North Carolina enacted Session Law 2024-28 on July 1, 2024, eliminating the 200-transaction threshold for remote sellers and marketplace facilitators.
Effective immediately, retailers must collect sales and use tax if their gross sales from remote transactions sourced to North Carolina exceed $100,000 in the previous or current calendar year, including marketplace sales. Marketplace facilitators must also collect tax if their gross sales from all marketplace sellers' transactions sourced to the state exceed $100,000 in the previous or current calendar year.
Vermont Now Taxing SaaS Sales
On June 17, 2024, Vermont enacted HB 887, which imposes sales and use tax on prewritten software accessed remotely, also known as software-as-a-service (SaaS). Effective July 1, 2024, the definition of tangible personal property is revised to include prewritten computer software, regardless of how it is paid for, delivered, or accessed. This new bill repeals the 2015 legislation that stated charges for remotely accessing prewritten software were not considered charges for tangible personal property under 32 V.S.A. Section 9701(7).
Frequently asked questions
1. What is California’s SB 1327 about?
SB 1327 imposes a 7.5% tax on data extraction transactions for online platforms with over $2.5 billion in annual gross receipts that sell user data or advertising.
2. What does California’s AB 886 require?
AB 886 mandates that large digital platforms (with sales or market cap over $550 billion or 1 billion+ active users) must pay or negotiate compensation for digital journalism content monetized through advertising.
3. What changed in North Carolina’s remote seller rules?
North Carolina removed the 200-transaction threshold. Now, remote sellers and marketplace facilitators must collect sales and use tax if their gross sales exceed $100,000 annually in the state.
4. How does Vermont’s new law affect SaaS providers?
Vermont’s HB 887 makes remote access to prewritten software (SaaS) taxable as tangible personal property, effective July 1, 2024.
5. Who is impacted by these tax changes?
Large digital platforms, online marketplaces, and remote sellers operating across states like California, North Carolina, and Vermont will need to update their tax compliance systems accordingly.
6. Why are these laws being introduced now?
They aim to modernize tax codes for the digital economy, ensuring that large online platforms and digital service providers contribute fairly to state tax revenues.
