If you are selling goods or products online and some of your customers are located in Wyoming, you need to be aware of the state’s Internet sales tax rules. As you read, keep in mind that collection of sales tax on Internet sales has been a matter of ongoing debate both at the state and federal level.
The federal government is currently considering legislation that would affect large Internet retailers and how online sales taxes are collected in all states. The proposed federal law, called the Marketplace Fairness Act of 2013, would allow states to require sellers not physically located in their state to collect taxes on online and catalog sales made to people in their state. Sellers that make $1 million or less in annual sales and have no physical presence in the state would be exempt from this requirement. States would have to meet certain criteria to simplify their sales tax laws and make sales tax collection easier before they could require sellers to collect the tax.
Below is an article on the current rules on Internet sales tax in Wyoming. The new federal law scheduled to be voted on in May 2013 would affect all state Internet sales tax laws so be sure to check for updates in this area. (We will continue to keep you updated as well.)
The General Rule: Physical Presence in the State
The current default rule throughout the United States is that you must collect sales tax on Internet sales to customers in those states where your business has a “physical presence.” The physical-presence rule is based on a 1992 United States Supreme Court decision, Quill Corp. v. North Dakota, that addressed the obligations of mail-order businesses to collect sales tax on out-of-state sales; the decision has been extended to include online retailers. Generally speaking, a physical presence means such things as:
- having a warehouse in the state
- having a store in the state
- having an office in the state, or
- having a sales representative in the state.
You can find limited, if somewhat ambiguous, guidance on how physical presence is defined specifically under Wyoming law by consulting Section 39-16-101 (a)(x) of the Wyoming Statutes (W.S.), which defines the term “vendor.” (Both the complete Wyoming sales tax statute and the complete Wyoming use tax statute are available online in their entirety from the state.) The definition includes having or maintaining a place of business in the state directly or by any subsidiary.
As you might expect, the corollary to the physical-presence rule is that, if you do not have a physical presence in the state, you generally are not required to collect sales tax for an Internet-based sale to someone in that state.
Example 1: You are operating solely out of a warehouse in Wheeling, West Virginia and make a sale to a customer in Rock Springs, Wyoming—a state where your business has no physical presence: You are not required to collect sales tax from the Rock Springs customer.
Example 2: You are operating solely out of an office in Laramie, Wyoming and make a sale to a customer in Gillette, Wyoming: You are required to collect sales tax from the Gillette customer.
Example 3: After several years of operating solely out of a warehouse in Wheeling, West Virginia, you open a one-room satellite office just outside of Cheyenne, Wyoming—a state where previously you had no physical presence. A day later, you make a sale to a customer in Casper, Wyoming: You are required to collect sales tax from the Casper customer.
Under Wyoming law, some items may be exempt from sales tax, and certain purchasers may not be required to pay sales tax. For example, most food for home consumption is exempt from sales tax. (Further information on this food exemption is available in a DOR bulletin.) For relatively complete information on exemptions, consult generally the various subsections of W.S. 39-15-105.
You might also consider reviewing Section 9 of Chapter 2 of the DOR’s administrative rules (Chapter 2 covers sales and use taxes). The current version of Chapter 2 is apparently only available as a scanned document from the Wyoming Secretary of State’s Office; however, there is also available an earlier, searchable version of Chapter 2, dating from 2006, though the earlier version is in various places substantively different from the current version.
The Customer’s Responsibility
In cases where the online retailer does not have to collect sales tax, it is the customer’s responsibility to pay the tax—in which case it is known not as a sales tax but, rather, a “use tax.” A Wyoming Department of Revenue (DOR) FAQ page on both sales and use taxes presents the question “Are my catalog purchases subject to the use tax?” and, as part of the answer, states, “Usually. Catalog and other companies not physically located in Wyoming cannot be required to collect sales or use tax on their sales to Wyoming customers.” Keep in mind that, under federal case law, Internet purchases are generally analogous to catalog purchases.
The DOR also publishes a Vendor Manual that briefly explains use tax in Wyoming; the Manual mentions that, “Use tax is complementary to the sales tax and is applied to out-of-state purchases. Use tax helps to place Wyoming merchants on an equal footing with out-of-state vendors who are not required to collect Wyoming's sales tax.”
While you might not know it from looking at Wyoming’s sales tax laws, the issue of whether to require online retailers to collect sales tax in states where they have no physical presence has been a matter of significant debate in many states and at the federal level. However, at this time Wyoming has not enacted any law that would require out-of-state retailers to collect sales tax from Washington customers.
In Wyoming, the physical-presence rule applies for Internet retailers. However, because the issue has been contentious in many places around the country, you should consider checking in periodically with the Wyoming Department of Revenue to see if the rules have changed. For more general information on taxes on Internet sales, see Nolo's article Sales Tax on the Internet. And, for information on the rules about collecting sales tax for Internet sales in any other state, see Nolo’s article, 50-State Guide to Internet Sales Tax Laws.