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On November 9, 2011, a bi-partisan group of U.S. senators introduced legislation that would give states implementing simplification requirements the authority to require remote sellers to collect sales and use tax. The legislation, called the Marketplace Fairness Act, would not limit the authorization to states who are members of the Streamlined Sales and Use Tax (SST) Agreement but would also apply to other states that implement some minimal simplification provisions. This follows other legislation on remote seller sales tax collection that has been introduced in Congress earlier this year.

Full member states of the SST Agreement would have collection authority for remote sales sourced to their state under the Agreement. The authority for full member states would start no earlier than the first day of the calendar quarter that is at least 90 days after the legislation is enacted. Collection authority would also be granted to non-SST member states that would start no earlier than the first day of the calendar quarter that is at least six months after the date that the state enacts legislation to impose the requirements. To comply, non-member states of the SST Agreement would need to implement the following minimum requirements:

• a single state-level agency to administer the collection and administration of all state and local taxes and local sales and use taxes on remote sales;
• a single audit for all state and local tax jurisdictions within the state;
• a single sales and use tax return for remote sellers and providers;
• a uniform sales and use tax base among the state and its local tax jurisdictions;
• a requirement that remote sellers and providers collect tax at the destination rate, which would be the sum of the state and local rate for the jurisdiction into which the sale is made;
• adequate software and services for remote sellers and providers to identify the applicable destination rate;
• certification procedures for providers to make software and services available to remote sellers and hold the providers harmless for errors or omissions resulting from information provided by the state;
• a provision to hold remote sellers using a provider harmless for provider errors and omissions;
• a provision relieving remote sellers from liability, including penalties and interest, for collecting the wrong amount of tax if the error was the result of relying on state-provided information; and
• 30 days notice to remote sellers and providers of a rate change by any state locality, which may only be effective on the first day of a calendar quarter.
• States would be able to certify a provider that would handle tax administration, collection, remittance and audits for transactions serviced or processed for remote seller sales.

A number of provisions in the legislation would apply whether a state receives collection authority as a member of the SST Agreement or by implementing the minimum requirements. A small seller exception would relieve remote sellers of collection if the seller and all related entities had $500,000 or less gross annual receipts in total remote sales in the United States in the preceding calendar year. A state’s collection authority would end on the date that the highest court of competent jurisdiction makes a final determination that the state no longer meets the requirements of the legislation, and the determination is not subject to appeal. The provision of the legislation would only apply to remote sales, not to intrastate sales or sourcing rules. However, states granted collection authority through the SST Agreement would need to comply with the intrastate provisions of the Agreement. (S. 1832, introduced in the U.S. Senate on November 9, 2011)

(11/14/2011)

A new online sales tax bill has been introduced in Congress. Contrary to the Main Street Fairness Act proposed this summer, participation in Streamlined Sales Tax is not required. According to the bill, in order for a state to require the collection of online sales and use taxes, the state must first implement a simplified system of sales tax administration, meeting four requirements. Remote sellers with less than $1 million in U.S. sales or $100,000 in sales in the state are exempt. Remote sellers will only have to file one sales and use tax return specific to remote sellers for the state, and they cannot be required to file returns more frequently than other sellers. There must be a uniform statewide tax base. Finally, remote sellers must collect sales and use tax under one of three rate structures: a single rate blending the state rate and the average local rate; the maximum state rate exclusive of local rates, or; the tax rate of the customer’s location, in which case the state must make available software that eases the burden of collecting at multiple rates. If a state imposes a lower rate on food or drugs and medicine, it may require remote sellers to collect sales and use tax at these rates. Once a state is authorized, the state may begin collecting six months after publishing a notice that lists the requirement, the criteria under which the collection is required, the effective date, the rate(s), and where remote sellers can obtain the tax filing return. (H.R. 3179)

(11/14/2011)

Both houses of Congress introduced legislation on July 29, 2011 that would give member states of the Streamlined Sales and Use Tax (SST) Agreement to collect sales tax from remote sellers that do not qualify for the small-seller exception although this is not defined in the bill. The legislation is referred to as the Main Street Fairness Act. Similar legislation was introduced previously but did not pass. Several provisions that appeared in previous versions of the bill have been eliminated. These include the requirement that the minimum SST simplifications include a single sales and use tax rate per taxing jurisdiction (the SST Agreement currently includes this requirement), a path to SST membership for federally recognized Indian tribes that comply with the Agreement, and a mandate that the minimum simplification requirements in the Agreement apply to sales and use tax on communications services. The new versions of the bill expand on previous versions’ requirement for reasonable vendor compensation by finding that the SST Agreement’s currently mandated compensation satisfies the minimum requirement. There are limitations on the impact of collection of tax under this bill and the creation of nexus for other taxes. The new bills would provide for judicial review of SST Governing Board actions by the U.S. Court of Federal Claims (S. 1452 and H.R. 2701, introduced in both houses of Congress on July 29, 2011)

(08/19/2011)

The U.S. House of Representatives has introduced a resolution opposing any legislation that would grant state governments the authority to impose any sales tax collecting requirements on out-of-state small businesses that partake in online commerce. Introduced by Rep. Daniel Lungren, R-Calif., the resolution states that introducing such tax legislation would adversely affect the economy and consumers and impede the growth of interstate commerce. (H. Res. 95, introduced in the U.S. House of Representatives on February 16, 2011)

(03/14/2011)

On July 1, 2010, HR 5660 was introduced by Rep DeLaHunt from Massachusetts which would impose a sales and use tax collection responsibility on remote sales made into states that are full members of the Streamlined Sales Tax Agreement (SSUTA). The bill references the SSUTA and incorporates many of the key provisions. It includes a provision for vendor compensation and a small business exception but does not provide any specifics in regards to these provisions. It also includes in its definition of state, Puerto Rico and the US Territories. It did not specifically address how digital goods should be taxed but did include a provision that each Member States should work with other Member States to prevent double taxation in situations where a foreign country has imposed a transaction tax on a digital good or service. The legislation is supported by the National Retail Federation, Retail Industry Leaders of America, International Council of Shopping Centers, Real Estate Investment Trusts Association, National Governors Association, U.S. Conference of Mayors, the National Conference of State Legislatures, National Association of Counties, and National League of Cities, and over 50 state-level retail associations and chambers of commerce. For a copy of the bill visit http://delahunt.house.gov/mainstreetfairnessact.pdf (H.R. 5660, July 1, 2010)

(08/01/2010)

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