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On August 25, 2016, House Judiciary Committee Chairman Robert Goodlatte released a discussion draft of the Online Sales Simplification Act of 2016. The legislation would implement a “hybrid origin” approach for remote sales. Under the legislation, states could impose sales tax on remote sales if the origin state participates in a clearinghouse.In this case, the tax is based on the origin state’s baseand taxability rules. The rate would be the origin state rate, unless the destination state participates. In that case, the rate used would be a single state-wide rate determined by each participating destination state. A remote seller would only remit sales tax to its origin state for all remote sales. Only the origin state would be able to audit a seller for remote sales. Non-participating states would not be able to receive distributions from the clearinghouse. Sellers would be required to provide reporting for remotes sales into participating states to the Clearinghouse so it can distribute the tax to the destination state. We will continue to monitor activity and update when the official bill is introduced.  (Discussion draft of Online Sales Simplification Act of 2016)

(09/08/2016)

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)

Massachusetts has issued guidance on the state sales tax implications of the City of Cambridge's “Bring Your Own Bag Ordinance.” The ordinance requires retail establishments, including restaurants, to impose a minimum charge for a checkout bag when the establishment provides bags to customerseffective March 31, 2016. The checkout bags subject to the ordinance do not qualify as exempt containers and are therefore subject to state sales tax, including the sales tax on meals. A local option meals tax may be applied on sales of the bags if such sales are reported on a meals tax return. Vendors of meals can report the charge for the bags either on their meals tax returns or on their sales tax returnsdepending on how they invoice and report the sale of the bag.  If the bag is included in the price of the meal and reported as part of the meals sales amounts, then the meals tax will apply.  If the bag is sold separately and reported on the sales tax return then only sales tax will apply. The local option meals tax is imposed in addition to the state sales tax on meals and is collected and remitted like the sales tax.(Technical Information Release 16-5, Massachusetts Department of Revenue, March 30, 2016)

(04/26/2016)

Massachusetts has enacted a 2016 tax amnesty program. All tax types administered by the Massachusetts Department of Revenue (DOR) are included, with the exception of Preferred Provider excise and those covered under the International Fuels Tax Agreement. An online amnesty return will be available on the DOR website beginning April 1, 2016 and will continue through May 31, 2016. Tax penalties and any interest due on those penalties will be waived for qualified participants. The amnesty program will have a three-year limited lookback period. Amnesty is available to any individual or business who has not currently registered with the DOR, who has not filed a tax return, or who has not reported the full amount of tax owed on a previously filed return for any tax return due on or before December 31, 2015. Amnesty is not available to individuals or businesses who are or have been the subject of a tax-related criminal investigation or prosecution, who have previously filed a false or fraudulent return or statement, or who file a fraudulent amnesty return. The 2016 amnesty program does not cover existing tax liabilities. Additionally, any taxpayer who participated in the 2014 or 2015 tax amnesties conducted by DOR is not eligible for the same tax types or tax periods. We strongly recommend all taxpayers who may have liability in Massachusetts review their records to determine if an amnesty filing is warranted.  After the amnesty program closes, Massachusetts’ new state-of-the-art integrated tax systemwill make it easier to identify those who have not complied with Massachusetts tax laws. Those who are discovered to have a liability after the period closes will be at risk for double the amount of tax due and other penalties, an unlimited lookback period as there is no statute of limitations on unfiled returns and the Department may impose a six-year lookback on a previously filed return if certain under-reporting criteria are identified.  The Department has also indicated that it will have escalating enforcement efforts, including potential criminal prosecution. (Release, Massachusetts Department of Revenue, January 18, 2016)

(02/23/2016)

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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