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On July 14, 2016, Rep. Jim Sensenbrenner (R-WI) introduced the No Regulation Without Representation Act of 2016.  Taking the opposite approach of the Marketplace Fairness Act and Remote Transactions Parity Act, this proposed bill would limit the ability of states to require remote sellers to collect use tax. If enacted, the Act would codify the physical presence requirement established by the US Supreme Court in Quill Corp v. North Dakota.  The bill would define physical presence and create a de minimis threshold. If enacted, the bill would preempt click-through nexus, affiliate nexus, reporting requirements and marketplace nexus legislation. The bill would be effective as of January 1, 2017. The bill defines “seller” and provides that states and localities may not:

 

  • Obligate a person to collect a sales, use or similar tax; 
  • Obligate a person to report sales; 
  • Assess a tax on a person; or 
  • Treat the person as doing business in a state or locality for purposes of such tax unless the person has a physical presence in the jurisdiction during the calendar quarter that the obligation or assessment is imposed.

 

Persons would be considered to have a physical presence only if during the calendar year the person: 

 

  • Owns or leases real or tangible personal property in the state; 
  • Has one or more employees, agents or independent contractors in the state specifically soliciting product or service orders from customers in the state or providing design, installation or repair services there; or 
  • Maintains an office in-state with three or more employees for any purpose.

 

Physical presence would not include: 

 

  • Click-through referral agreements with in-state persons who receive commissions for referring customers to the seller; 
  • Presence for less than 15 days in a taxable year; 
  • Product delivery provided by a common carrier; or 
  • Internet advertising services not exclusively directed towards, or exclusively soliciting in-state customers.

 

The bill defines seller to exclude marketplace providers; referrers; third-party delivery services in which the seller does not have an ownership interest; and credit card issuers, transaction or billing processors or financial intermediaries.Marketplace Providers are defined as any person other than the seller who facilitates a sale which includes listing or advertising the items or services for sale and either directly or indirectly collects gross receipts from the customer and transmits the amounts to the marketplace seller. (No Regulation Without Representation Act of 2016 (H.R. 5893))

 

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.

(08/23/2016)

Vermont Gov. Peter Shumlin has signed legislation containing sales and use tax notice and reporting requirements and economic nexus provisions. The notice and reporting requirements are more stringent than the provisions enacted in 2011 which only required posting information on order sites and information.  The new legislation requires non-collecting vendors making sales into Vermont to notify purchasers that sales or use tax is due on nonexempt purchases they make from the vendor and that Vermont requires the purchaser to file a sales or use tax return. "Noncollecting vendor" is defined as a vendor that sells tangible personal property to purchasers who are not exempt from Vermont sales tax and that does not collect the tax. The notice must be provided by January 31 of each year to Vermont purchasers who have made purchases amounting to $500 or more from the vendor in the previous calendar year. The notice must include the total amount paid by the purchaser for Vermont purchases made from the vendor in the previous calendar year. The notice must also state that Vermont requires a sales or use tax return to be filed and tax to be paid on nonexempt purchases made by the purchaser from the vendor. The notice must be sent separately to all Vermont purchasers by first-class mail or email and must not be included with any other shipments. The notice must include the words "Important Tax Document Enclosed" on the mailer and must include the name of the vendor. Failure to send the notice will subject the vendor to a $10 penalty for each such failure, unless the vendor shows reasonable cause for the failure. These notice and reporting requirements provision is effective on the earlier of July 1, 2017, or beginning on the first day of the first quarter after the sales and use tax reporting requirements challenged in Direct Marketing Assoc. v. Brohl are implemented by the state of Colorado. For more information on the Colorado case, see our news item U.S. Court of Appeals Upholds Colorado’s Use Tax Reporting Requirements.

 

In addition to the click through nexus legislation that was originally passed in 2011 and effective December 1, 2015, economic nexus legislation has now also been enacted.  Per the enacted legislation, a remote seller making sales of tangible personal property from outside Vermont to a destination in Vermont, who does not maintain a place of business or other physical presence in Vermont, meets the definition of "vendor" required to collect and remit Vermont sales or use tax if the person:

  • engages in regular, systematic, or seasonal solicitation of sales of tangible personal property in Vermont through various means of communication, and
  • has made sales from outside Vermont to destinations in Vermont of at least $100,000 or totaling at least 200 individual sales transactions during any 12-month period preceding the monthly period at issue. Previously, the threshold was sales from outside Vermont to destinations in Vermont of at least $50,000 during any 12-month period preceding the monthly or quarterly period at issue.

 

The changes to the economic nexus thresholds are effective on the later of July 1, 2017, or beginning on the first day of the first quarter after a controlling court decision or federal legislation abrogates the physical presence requirement of Quill Corp. v. North Dakota, 504 U.S. 298 (1992). (H.B. 873, Laws 2016, effective May 25, 2016, except as noted)

 

For an update on this news item, see Vermont Enacts Additional Notice Requirement for Noncollecting Vendors.

(06/06/2016)

In 2011, the Vermont legislature passed what is commonly referred to as a click through nexus law, providing that a remote vendor will be presumed to have Vermont nexus for purposes of collecting sales tax if it has agreements with residents to refer customers that led to sales in excess of $10,000 in the previous year32 V.S.A. Section 9701(I). This law takes effect after the Attorney General makes a determination that 15 or more states have similar provisions. Act 45 of 2011, Section 37(13).As a result, impacted remote sellers must register and begin collecting and remitting Vermont sales tax on December 1, 2015. An online application to obtain a Vermont business tax account and license to collect and remit Vermont sales tax is available at www.myvtax.vermont.gov. For our previous news item on this, visit Vermont Discusses Timeline for Implementing Click-Through Nexus. (VTax Connect Newsletter, Volume 2, Issue 4, Vermont Department of Taxes, November 2015; Updated: Statement of Vermont Department of Taxes on Vermont Click Through Nexus Law, Vermont Department of Taxes, November 2015)

(11/23/2015)

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)

Vermont has issued a statement regarding its timeline for implementing the effective date of the state’s click-through nexus sales and use tax law. The law is to take effect after the Attorney General determines that 15 or more states have provisions similar to Vermont’s click-through nexus law.The Department of Taxes states that, in the spirit of the Streamlined Sales and Use Tax (SST) Agreement (of which Vermont is a member), it will provide notice before enforcing the click-through nexus law. The deadline for remote sellers to register with Vermont will be on the first day of the month that is at least 30 days after the Attorney General’s determination. According to the Department, the Attorney General’s office considers 13 states to have click-through nexus laws currently in effect. Three additional states (Washington, Michigan and Nevada) have measures currently set to take effect in the fall of 2015. The Attorney General’s office will review the status of the legislation in these three states and in the other 13 states in October 2015 and will consult with the Department of Taxes then. The Attorney General’s Office may then make a determination that 15 or more states have similar provisions and that the Vermont law will take effect. For our previous news item on this topic, visit Vermont Signs Click-Through Nexus, Reporting Requirements Legislation. (Statement of Vermont Department of Taxes on Vermont Click Through Nexus Law, Vermont Department of Taxes, August 2015)

(08/25/2015)

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