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The Streamlined Sales and Use Tax (SST) Governing Board has  issued a best practices matrix which provides answers to whether the state follows the best practices set forth in the SST Agreement regarding deal-of-the-day vouchers. All SST Member states are to complete and publish their position on the best practices.  The matrix outlines if the “best practiceas approved by the Streamlined Sales Tax Governing Board (SSTGB) for each of the products, procedures, services, or transactions identified in the chartis followed by the specific state. The following best practice descriptions are listed in the matrix along with whether the state follows the best practice:

 

1.       The member state administers the difference between the value of a voucher allowed by the seller and the amount the purchaser paid for the voucher as a discount that is not included in the sales price (i.e., same treatment as a seller’s in-store coupon), provided the seller is not reimbursed by a third party, in money or otherwise, for some or all of that difference.

2.       The member state provides that when the discount on a voucher will be fully reimbursed by a third party the seller is to use the face value of the voucher (i.e., same as the treatment of a manufacturer's coupon) and not the price paid by the purchaser as the measure (sales price) that is subject to tax.

3.       The member state provides that costs and expenses of the seller are not deductible from the sales price and are included in the measure (sales price) that is subject to tax. Further, reductions in the amount of consideration received by the seller from the third party that issued, marketed, or distributed the vouchers, such as advertising or marketing expenses, are costs or expenses of the seller.

 

Unless otherwise listed below, the SST member states have published the Best Practices Matrix and follow the three best practices listed above.

 

The following SST member states have issued the matrix but don’t follow some or all of the best practices listed above as of April 2014: Georgia, Kansas, Nebraska, New Jersey, and Ohio.

 

The following SST member states have not yet issued the matrix as of April 2014: Tennessee, Utah, Vermont, and Wyoming.  Copies of the matrix can be found on each specific state information page on the SST Web page at http://www.streamlinedsalestax.org/index.php?page=state-info.

(05/06/2014)

Iowa has amended the statutory definition of "dietary supplement" to keep the state in compliance with the Streamlined Sales Tax Agreement. "Dietary supplement" is defined as any product, other than tobacco, intended to supplement the diet that meets all of the following criteria: The product contains a vitamin, mineral, herb, other botanical, amino acid, a dietary substance for use by humans to supplement the diet by increasing the total dietary intake, or a concentrate, metabolite, constituent, extract, or combination of any of the ingredients previously listed; The product is intended for ingestion in tablet, capsule, powder, softgel, gelcap, or liquid form, or if not intended for ingestion in such a form, is not represented as conventional food and is not represented for use as a sole item of a meal or the diet; The product is required to be labeled as a dietary supplement, identifiable by the "supplement facts" box found on the label. The change was made to stipulate that all requirements must be met for the product to qualify as a dietary supplement.  (H.F. 2436, Laws 2014, effective July 1, 2014)

(04/29/2014)

Representative Lamar Smith (Republican, Texas) has introduced a bill to bar multiple taxes on digital goods and services.  Smith had proposed an earlier bill which failed to pass.  This bill is a revised version of the earlier bill. The proposed bill – called the Digital Goods and Services Tax Fairness Act of 2013 – would only allow a state to tax sales of digital goods and services to customers with a tax address within that state. Additionally, states would be barred from imposing multiple taxes on digital goods. The bill defines digital goods as sounds, images, data and facts maintained in digital form. Internet access service is not included as a digital good in the bill. (H.R. 3724)

(01/28/2014)

Iowa has enacted affiliate nexus provisions for sales and use tax purposes. Per the legislation, a retailer is presumed to be maintaining a place of business in Iowa if any person with substantial nexus in the state, other than a person acting as a common carrier, does any of the following: sells a similar line of products as the retailer and does so under the same or similar business name; maintains an office, distribution facility, warehouse, storage place, or similar place of business in Iowa to facilitate the delivery of property or services sold by the retailer to the retailer’s customers; uses trademarks, service marks, or trade names in the state that are the same or substantially similar to those used by the retailer; delivers, installs, assembles, or performs maintenance services for the retailer’s customers; facilitates the retailer’s delivery of property to customers in Iowa by allowing the retailer’s customers to take delivery of property sold by the retailer at an office, distribution facility, warehouse, storage place, or similar place of business maintained by the person in the state; or conducts any other activities in Iowa that are significantly associated with the retailer’s ability to establish and maintain a market in the state for the retailer’s sales. The presumption may be rebutted if the retailer shows proof that the person’s activities in Iowa are not significantly associated with the retailer’s ability to establish or maintain a market in the state for the retailer’s sales.

Additionally, any ruling, agreement, or contract entered into between a retailer and a state agency which provides that the retailer is not required to collect sales and use tax in Iowa despite the presence in the state of a warehouse, distribution center, or fulfillment center that is owned and operated by the retailer or an affiliate of the retailer is null and void unless the ruling, agreement, or contract is approved, by resolution, by a majority vote of each house of the General Assembly.

The legislation also contains provisions related to making sales to state agencies. Any person making taxable sales of tangible personal property or furnishing services to any state agency must have a permit to collect sales or use tax prior to the sale. A state agency cannot purchase tangible personal property or services from any person unless that person has a valid, unexpired permit and is in compliance with all other requirements imposed upon retailers, including, but not limited to, collection, remittance, and filing requirements.(H.F. 625, Laws 2013, effective June 11, 2013)

(06/25/2013)

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)

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