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On September 30, 2015 the U.S. House of Representative passed H.R. 719, which includes a provision that would extend the Internet Tax Freedom Act (ITFA) through December 11, 2015. The ITFA was scheduled to expire on October 1, 2015. The bill will now go to President Obama for signature.

 

To see our previous news item on the ITFA, visit Internet Tax Freedom Act Extended Until October 1, 2015, Permanent Extension Introduced.

 

To see an update on this news item, visit Internet Tax Freedom Act Extended Through October 1, 2016,

 

(H.R. 719)

(10/26/2015)

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)

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)

On December 16, 2014, President Barack Obama signed the Consolidated and Further Continuing Appropriations Act, 2015, for sales and use tax purposes. The Act includes a provision that extends the Internet Tax Freedom Act (ITFA) until October 1, 2015 with all provisions unchanged.

 

On January 9, 2015, the House of Representative introduced a bill (un-numbered) that would permanently extend the ITFA, banning states and local jurisdictions from imposing any new tax on internet access. The proposed bill removes the current effective dates of November 1, 2003 through October 1, 2015 and changes the effective date to be effective for new taxes imposed after the date of the enactment.  It is not clear if states that have been grandfathered under the existing provision could retain their current tax on internet access but it appears that may be the case.  No formal legislation has been introduced that would incorporate the Marketplace Fairness Act into this bill. The bill is sponsored by House Judiciary Committee Chairman Bob Goodlatte, among others.

 

For our previous news item on this topic, see Internet Tax Freedom Act is Extended Through December 11, 2014.

 

For an update on this news item, see Internet Tax Freedom Act Extended Until December 11, 2015.

 

(Consolidated and Further Continuing Appropriations Act, 2015; H.R. 235)

(02/12/2015)

Effective January 1, 2015, California has amended a sales and use tax regulation regarding taxable sales of food products to make the regulation’s treatment of  tips, gratuities, and service charges consistent with the records retailers keep for reporting such payments as tip wages or non-tip wages for Internal Revenue Service purposes. The amendments add a new presumption regarding whether a tip, gratuity, or service charge is subject to tax based on such records. An optional payment designated as a tip, gratuity, or service charge is not subject to sales tax. A mandatory payment designated as a tip, gratuity, or service charge is included in taxable gross receipts, even if it is subsequently paid by the retailer to employees. Per the updated agreement, for optional payments, when a retailer keeps records consistent with reporting amounts as tip wages for IRS purposes, such amounts are presumed to be optional and not subject to tax. When a retailer does not maintain such records, this presumption does not apply and the amounts may be mandatory and included in taxable gross receipts. If an employer misappropriates these amounts, such payments are included in the retailer’s taxable gross receipts.  Per the updated agreement, for mandatory payments, when a retailer’s records reflect that amounts are required to be reported to the IRS as non-tip wages, the amount is deemed to be mandatory. When a retailer does not maintain records for purposes of reporting the amounts to the IRS:

 

  • An amount negotiated between the retailer and the customer in advance of a meal, food, or drinks, or an event that includes a meal, food, or drinks is mandatory.
  • When the menu, brochures, advertisements or other printed materials contain statements that notify customers that tips, gratuities, or service charges will or may be added, an amount automatically added by the retailer to the bill or invoice presented to and paid by the customer is a mandatory charge and subject to tax. These amounts are considered negotiated in advance.

 

An amount will be considered “automatically added” when the retailer adds the amount to the bill without first conferring with the customer after service of the meal. Nonetheless, any amount added by the retailer is presumed to be automatically added and mandatory. It is presumed that an amount added as a tip by the retailer to the bill or invoice presented to the customer is automatically added and mandatory. A statement on the bill or invoice that the amount added by the retailer is a “suggested tip,” “optional gratuity,” or that the amount “may be increased, decreased, or removed” by the customer does not change the mandatory nature of the charge. This presumption may be controverted by documentary evidence showing that the customer specifically requested and authorized the amount be added to the bill. The retailer must retain the guest checks and any additional separate documents to show that the payment is optional. (Reg. 1603, California State Board of Equalization, effective January 1, 2015)

(12/29/2014)

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