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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)

Effective July 1, 2017, remote sellers must notify Louisiana purchasers at the time of sale that a purchase is subject to Louisiana use tax unless it is specifically exempt and there is no specific exemption for purchases made over the Internet, by catalog, or by other remote means. The notice must also include a statement that Louisiana law requires that use tax liability be paid annually on the individual income tax return or through other means as may be required by administrative rule. Per the legislation, "remote retailer" means a retailer that purposefully avails itself of the benefits of an economic market in Louisiana or who has any other minimum contacts with the state and who:

 

  • Is not required by law to register as a dealer or to collect Louisiana sales or use tax,
  • Makes retail sales of tangible personal property or taxable services in Louisiana and the cumulative annual gross receipts of the retailer and its affiliates from those Louisiana sales exceed $50,000 per calendar year, and
  • Does not collect and remit Louisiana sales and use tax on retail sales in the state.

 

By January 31st of each year, a remote seller must send to each Louisiana purchaser an annual notice containing the total amount paid by the purchaser to the retailer for property or taxable services in the preceding calendar year. The notice must list the dates and amounts of purchases if available, state whether the property or service is exempt from tax if known by the retailer, give the name of the retailer, and state that Louisiana use tax may be due.

 

By March 1st of each year, a remote seller must file with the Louisiana Department of Revenue an annual statement for each Louisiana purchaser which includes the total amount paid by the purchaser to that retailer for property or taxable services in the preceding calendar year. The statement shall not contain detail as to the property or services purchased. (Act 569 (H.B. 1121), Laws 2016, effective July 1, 2017)

(07/25/2016)

Louisiana’s state sales and use tax rate on sales and leases of tangible personal property and sales of certain services increases from 4% to 5%, effective April 1, 2016 through June 30, 2018. A new provision lists 65 items that are exempt or excluded from the additional 1% tax. For the entire list of items, visit the Louisiana Department of Revenue website. The transactions that are exempt from the additional 1% tax do not completely match the transactions that were exempt from the previous 4% tax.(Act 26 (H.B. 62), Laws 2016, First Extraordinary Session)

(04/01/2016)

Louisiana has enacted click-through and affiliate nexus provisions, applicable to tax periods beginning on and after April 1, 2016. Louisiana’s definition of a dealer for tax collection purposes is expanded to include any person soliciting business through an independent contractor or other representative pursuant to an agreement with a Louisiana resident or business under which the resident or business, for a commission, referral fee, or other consideration, directly or indirectly, refers potential customers to the seller, whether by an internet link, an in-person oral presentation, telemarketing, or otherwise. The click-through legislation applies to sellers whose cumulative gross receipts from sales of tangible personal property to customers in Louisiana who are referred to the person through such an agreement exceed $50,000 during the preceding 12 months. This presumption may be rebutted if the person can demonstrate that he cannot reasonably be expected to have gross receipts in excess of $50,000 for the succeeding 12 months.

 

The legislation also expands the definition of a dealer to include any person who:

 

  • Sells the same or a substantially similar line of products as a Louisiana retailer under the same or substantially similar business name, using the same trademarks, service marks, or trade names that are the same or substantially similar to those used by the Louisiana retailer.
  • Solicits business and develops and maintains a market in Louisiana through an agent, salesman, independent contractor, solicitor, or other representative pursuant to an agreement with a Louisiana resident or business, under which the affiliated agent, for a commission, referral fee, or other consideration, engages in activities in Louisiana that benefits the person's development or maintenance of a market for its goods or services in the state. Such activities of the affiliated agent shall include referral of potential customers to the person, either directly or indirectly, whether by link on an Internet website or otherwise.

 

Additionally, a person will be presumed to be a dealer if it holds a substantial ownership interest, directly or through a subsidiary, in a retailer maintaining sales locations in Louisiana, or is owned, in whole or in substantial part, by a retailer maintaining sales locations in Louisiana or by a parent or subsidiary thereof. For purposes of the legislation, "substantial ownership interest" means affiliated persons with respect to each other where one of such persons has an ownership interest of more than 5%, whether direct or indirect, in the other, or where an ownership interest of more than 5%, whether direct or indirect, is held in each of such persons by another person or by a group of other persons which are affiliated persons with respect to each other.

 

The click-through and affiliate nexus provisions for establishing a person as a dealer for sales and use tax purposes shall not be used in determining whether the person is liable for payment of Louisiana income and franchise taxes. If the U.S. Congress enacts legislation authorizing states to require a remote seller to collect sales and use taxes on taxable transactions, the federal law shall preempt the provisions of the Louisiana law. (Act 22 (H.B. 30), Laws 2016, First Extraordinary Session)

(03/24/2016)

On February 11, 2016, the U.S. Senate approved a permanent extension of the Internet Tax Freedom Act (ITFA) that is included in H.R. 644, the Trade Facilitation and Trade Enforcement Act of 2015. The bill also establishes an end date of June 30, 2020 for the seven states that currently impose a tax on internet access: Hawaii, New Mexico, North Dakota, Ohio, South Dakota, Texas, and Wisconsin. President Obama is expected to sign the permanent extension of the ITFA into law. The House of Representatives had previously passed H.R. 235, the Permanent Internet Tax Freedom Act, on December 15, 2015.  For our previous news item on this topic, visit Internet Tax Freedom Act Extended Through October 1, 2016.

 

UPDATE: On February 24, 2016, President Barack Obama signed into law the permanent extension of the Internet Tax Freedom Act.

 

(Trade Facilitation and Trade Enforcement Act of 2015)

(02/23/2016)

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