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On June 15, 2015, Representative Jason Chaffetz (R-UT) introduced the Remote Transactions Parity Act (RTPA) of 2015 in the U.S. House of Representatives. The bill – similar to the Marketplace Fairness Act (MFA) of 2015 – pertains to sales and use taxcollection obligations for remote sellers, but the RTPA contains some differences and several additional provisions. Unlike the MFA’s $1 million small seller exception, the RTPA’s small seller exception is as follows: first year: $10 million; second year: $5 million; third year: $1 million. The exception goes away in the fourth year. Furthermore, under the RTPA sellers utilizing an electronic marketplace are not considered small sellers and are not entitled to the exception, no matter the year. Under the RTPA, sellers would not be audited by states where they don’t have a physical presence. There would be a three year statute of limitations for assessments on remote sellers. The bill would enable remote sellers to refund over-collected tax to customers. The RTPA also specifies that a state would not be authorized to impose a sales and use tax collection requirement on remote sellers until it has certified multiple software providers that are certified in all states seeking to impose authorization requirements. The RTPA would also allow customers to pursue refunds of over-collected tax from remote sellers. However, RTPA does not preempt states from imposing sales and use taxes on remote sellers that do not have physical presence under this definition. It merely authorizes states to impose sales and use tax on remote sellers without a physical presence. Under the RTPA, if a seller has nexus under existing law, including Quill v. North Dakota, then the state may still impose a sales and use tax collection requirement.  The bill is assigned to the Judiciary Committee just like the MFA.  On July 1, 2015 it was referred to the Subcommittee on Regulatory Reform, Commercial And Antitrust Law. (H.R. 2775, the Remote Transactions Parity Act of 2015)

 

UPDATE: This bill failed to pass during the 114th Congressional Session running from January 3, 2015 to January 3, 2017.  Therefore, this bill has died and would need to be reintroduced to be considered and voted on.

(09/08/2015)

On March 10, 2015, a bipartisan group of senators introduced the Marketplace Fairness Act of 2015. Similar legislation – the Marketplace Fairness Act of 2013 – was previously introduced in February 2013 and passed by the Senate on May 6, 2013. That legislation failed to be enacted. If passed, the Marketplace Fairness Act of 2015 would authorize states meeting certain requirements to require remote sellers that do not meet a "small seller exception" to collect their state and local sales and use taxes. For more information on the previous legislation, visit Federal Government Introduces New Remote Seller Bill. (Marketplace Fairness Act of 2015, March 10, 2015)

 

UPDATE: This bill failed to pass during the 114th Congressional Session running from January 3, 2015 to January 3, 2017.  Therefore, this bill has died and would need to be reintroduced to be considered and voted on.

(03/16/2015)

The federal Marketplace Fairness Act of 2013 was introduced in the House of Representatives and the Senate on February 14, 2013.  If passed, the bill would authorize states that meet certain requirements to require remote sellers that do not meet a "small seller exception" to collect their state and local sales and use taxes.  Under the legislation, a state would be authorized to require a remote seller to collect sales and use taxes only if the remote seller has gross annual receipts in total remote sales in the United States of more than $1 million in the preceding calendar year.

 

Member states of the Streamlined Sales and Use Tax (SST) Agreement would be authorized to require all sellers that do not qualify for the small seller exception to collect and remit sales and use taxes with respect to remote sales sourced to that member state pursuant to the provisions of the SST Agreement. The SST Agreement would have to include certain minimum simplification requirements. An SST member state could begin to exercise authority under the Act beginning 90 days after the state publishes notice of its intent to exercise such authority, but no earlier than the first day of the calendar quarter that is at least 90 days after the date of the enactment of the Act.

 

States that are not members of the SST Agreement would be authorized, notwithstanding any other provision of law, to require all sellers that do not qualify for the small seller exception to collect and remit sales and use taxes with respect to remote sales sourced to the state if the state implements certain minimum simplification requirements. The authority would begin no earlier than the first day of the calendar quarter that is at least six months after the state enacts legislation to exercise the authority granted by the Act.

 

To enforce collection requirements on remote sellers that do not meet the small seller exception, states that are not members of the SST Agreement would have to implement the minimum simplification requirements listed below. For SST member states to have collection authority, the requirements would have to be included in the SST Agreement.

 

-       A single entity within the state responsible for all state and local sales and use tax administration, return processing, and audits for remote sales sourced to the state

-       A single audit of a remote seller for all state and local taxing jurisdictions within that state

-       A single sales and use tax return to be used by remote sellers to be filed with the single entity responsible for tax administration.

-       Each state would have to provide a uniform sales and use tax base among the state and the local taxing jurisdictions within the state.

-       Each state would have to source all interstate sales in compliance with the sourcing definition outlined below.

-       Each state would have to provide information indicating the taxability of products and services along with any product and service exemptions from sales and use tax in the state and a rates and boundary database. States would have to provide free software for remote sellers that calculates sales and use taxes due on each transaction at the time the transaction is completed, that files sales and use tax returns, and that is updated to reflect state and local rate changes. States would also have to provide certification procedures for persons to be approved as certified software providers (CSPs). Such CSPs would have to be capable of calculating and filing sales and use taxes in all the states qualified under the Act.

-       Each state would have to relieve remote sellers from liability to the state or locality for incorrect collection, remittance, or noncollection of sales and use taxes, including any penalties or interest, if the liability is the result of an error or omission made by a CSP.

-       Each state would have to relieve CSPs from liability to the state or locality for the incorrect collection, remittance, or noncollection of sales and use taxes, including any penalties or interest, if the liability is the result of misleading or inaccurate information provided by a remote seller.

-       Each state would have to relieve remote sellers and CSPs from liability to the state or locality for incorrect collection, remittance, or noncollection of sales and use taxes, including any penalties or interest, if the liability is the result of incorrect information or software provided by the state.

-       Each state would have to provide remote sellers and CSPs with 90 days’ notice of a rate change by the state or any locality in the state and update the taxability and exemption information and rate and boundary databases, and would have to relieve any remote seller or CSP from liability for collecting sales and use taxes at the immediately preceding effective rate during the 90-day notice period if the required notice is not provided.

 

For non-SST member states, the location to which a remote sale is sourced would be the location where the item sold is received by the purchaser, based on the location indicated by instructions for delivery. When no delivery location is specified, the remote sale is sourced to the customer's address that is either known to the seller or, if not known, obtained by the seller during the transaction, including the address of the customer's payment instrument if no other address is available. If an address is unknown and a billing address cannot be obtained, the remote sale is sourced to the address of the seller from which the remote sale was made. SST member states would be required to comply with the sourcing provisions of the SST Agreement.

 

On March 22, 2013, the U.S. Senate voted 75-to-24 in favor of the concept of the Marketplace Fairness Act. The actual Marketplace Fairness Act was introduced in both chambers in February, but last week Senator Enzi, the sponsor of the Senate bill, offered an amendment to the 2014 Budget Resolution that would include insertion of the language of Marketplace Fairness in the budget. It was a largely symbolic tactic since the Budget Resolution itself will not become law, but by approving the amendment, the Senate has shown that there is broad, bipartisan support for the notion of requiring remote sellers to collect sales tax.

 

On May 6, 2013, the U.S. Senate passed the Marketplace Fairness Act with a 69-27 vote.

 

UPDATE: On September 18, 2013, Rep. Bob Goodlatte, the chairman of the House Judiciary Committee released a set of seven principles that he believes any internet sales tax bill should meet.  The seven principles outlined by Goodlatte are tax relief, tech neutrality, no regulation without representation, simplicity, tax competition, states’ rights, and privacy rights.  For more details on the principles, click here to see the House Judiciary Committee’s press release.

 

We are continuing to track the activities of these bills.  We are also involved in planning efforts involving states and businesses regarding the potential implementation consequences of passage.  Watch for updates in the Sales Tax Compass as well as through our Twitter account and LinkedIn updates. 

 

The text of the bill passed by the Senate can be viewed here.

 

For an update on this news item, visit Senate Introduces Marketplace Fairness Act of 2015.

 

(H.R. 684 and S. 336, as introduced in Congress on February 14, 2013; S.743, as passed by the U.S. Senate on May 6, 2013)

(09/20/2013)

California Governor Edmund Brown has signed new legislation that delays the implementation of click-through and affiliate nexus provisions that were enacted earlier this year (under A.B. 28). Under the new law, the enactment of the click-through and affiliate nexus provisions is conditional on federal authorization for states to require sellers to collect taxes on sales of goods to in-state customers regardless of the seller’s location. Effective retroactively to June 28, 2011, the new law restores the definition of a “retailer engaged in business in the state” to the definition that was in place before A.B. 28 was enacted.

Under the new law, the nexus provisions of A.B. 28 are reenacted and made effective on September 15, 2012 if federal authority is not enacted on or before July 31, 2012. Alternately, the provisions will be effective on January 1, 2013 if federal authority is enacted on or before July 31, 2012 but California doesn’t elect to implement the federal law on or before September 14, 2012. The legislation doesn’t specify what the operative date would be if federal authority is enacted by July 31, 2012 and California implements it by September 14, 2012.

The new law also increases the threshold for the click-through nexus provisions. The threshold is raised from $500,000 in total sales in California (outlined in A.B. 28) to $1 million. Click here for more details on the enactment of A.B. 28.

This bill was in reaction to a petition for a state wide challenge to repeal the original bill. If the efforts had gained enough signatures and been submitted by the deadline, it would have been placed on a state-wide ballot in the next general election. (A.B. 155, as enrolled and sent to the governor on September 14, 2011, effective September 23, 2011; Press Release, Office of the California Attorney General, July 18, 2011; Referendum, Initiative and Referendum Qualification Status, California Secretary of State, July 18, 2011; News Release 83-11-H, California State Board of Equalization, July 18, 2011)

(10/24/2011)

California has enacted click-through and affiliate nexus legislation that expands the definition of a retailer engaged in business in California, effective as of June 29, 2011. The definition now includes any retailer who enters into an agreement with a person in California in which the person directly or indirectly refers potential purchasers of tangible personal property to the retailer for a commission or other consideration, whether through an internet link, website, or otherwise. Two conditions must be met for the definition to apply. First, the cumulative sales price from all of the retailer’s sales of tangible personal property in the preceding 12 months to California purchasers referred pursuant to such an agreement must exceed $10,000. Second, the retailer’s total cumulative sales of tangible personal property to California purchasers must exceed $500,000 in the preceding 12 months. Under the provision, an “agreement” does not include any agreement in which a retailer purchases advertisements from a person in California, whether on television, radio, print, internet, or by any other medium, unless the ad revenue paid consists of commissions or other consideration based on sales of tangible personal property. In addition, “agreement” does not include any agreement in which a retailer engages a person in California to place an advertisement on a website operated by that person (or another person in the state), unless the person also directly or indirectly solicits potential customers in California through flyers, newsletters, phone calls, e-mail, blogs, micro blogs, social networking sites, or other means of direct and indirect solicitation targeted specifically at potential California customers. The click-through nexus provisions do not apply if the retailer can demonstrate that the person in California with whom the retailer has an agreement did not engage in referrals that would satisfy the Commerce Clause requirements of the U.S. Constitution. In addition to the click through nexus provisions, this bill includes in the definition of “retailer” an entity affiliated with a retailer under federal income tax law within the meaning of IRC §1504. The term “retailer engaged in business in this state” includes any retailer that is a member of a commonly controlled group and a combined reporting group that includes another member of the group that performs services in California in connection with tangible personal property to be sold by the retailer. This includes but is not limited to the design and development of said tangible personal property and the solicitation of sales of tangible personal property on behalf of the retailer. The California State Board of Equalization (BOE) instructs businesses meeting the requirements above and who are not already registered to fill out and submit and application for a California Certificate of Registration - Use Tax. The BOE has announced that the new law does not require retailers to collect district use taxes unless they are engaged in business in the taxing districts. For an update on the status of A.B. 28, click here (Ch. 7 (A.B. 28), Laws 2011 (First Extraordinary Session), effective June 29, 2011; News Release 81-11-G, Special Notice L-284, and BOE Publication 77 Out-of-State Sellers: Do you Need To Register With California?, California State Board of Equalization, July 1, 2011, July 2011, and June 2011; News Releases 84-11-H, 85-11-H, California State Board of Equalization, July 25 and 26, 2011)

(07/28/2011)

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