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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)

Effective June 30, 2013, the Louisiana Department of Revenue (DOR) will phase out its Audit Protest Bureau (APB) for purposes of all taxes administered by the DOR.  In the upcoming months, the APB staff will continue to work on its current inventory. As of January 18, 2013, the APB will accept no new protests.  The audit protest process will be conducted by the DOR’s Field Audit Service Division in the future.(Revenue Information Bulletin No. 13-007, Louisiana Department of Revenue, January 17, 2013)

(02/25/2013)

The Louisiana Department of Revenue has announced that it will participate in the new Federal-State Offset Program.  Participation in the program will allow the state to intercept payments owed by the federal government to vendors and contractors to use for the payment of non-tax debts owed to the state.  Under this initiative, a participating state agency will submit to the program delinquent debts it has made extensive efforts to collect from the debtor. The program will then match those debts to a federal database of taxpayers, vendors, and contractors owed refunds or payments from the federal government.  If a match is found, the program will claim those refunds or payments and forward them to the state agency for payment of the outstanding debt. The department is currently developing an implementation plan for the program.  (Press Release, Louisiana Department of Revenue, October 12, 2012)

(11/26/2012)

The Louisiana Tax Free Shopping Program has opened a refund center in Baton Rouge. The program provides a tax exemption in the form of a refund on most retail purchases made by international visitors to Louisiana. In order to qualify for the program, visitors must be travelling on a foreign passport with a current U.S. tourist visa and be staying in the country for less than 90 days. The sales tax refund is offered on tangible items purchased at tax-free stores then permanently removed from the United States. A sales tax refund is not offered for personal services including lodging and meals. When making a purchase, the individual must display his or her passport or current official picture ID and pay the entire purchase price, including the sales tax. The individual will then be given a voucher along with their receipt or invoice. The sales tax refund is paid in U.S. currency up to $500, and checks are issued on refunds over $500. Individuals can also obtain refunds via the mail. (Tax Topics, Louisiana Department of Revenue, September 27, 2011)

(11/14/2011)

In a sales and use tax opinion, the Attorney General of Louisiana has stated that bottled water is not exempt from sales and use tax. The sale of bottled water does not fit into the Louisiana sales and use tax exclusion for water “sold directly to the consumer for residential use.” That term includes the furnishing of natural gas, electricity, or water to private residences and for which residences are separately measured or metered. Bottled water also does not fit into the sales and use tax exclusion for “Water (not including mineral water or carbonated water or any water put in bottles, jugs, or containers, all of which are not exempted).” If water were to be treated as food, it still wouldn’t qualify for the exemption for food sold for preparation and consumption in the home. Bottled water does not require any preparation to be consumed in the home and thus does not qualify for the exemption. (Opinion No. 10-0296, Louisiana Attorney General, February 16, 2011)

(04/13/2011)

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