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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)

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)

On December 18, 2015, President Barack Obama signed H.R. 2029 – Consolidated Appropriations Act, 2016. The Act extends the Internet Tax Freedom Act (ITFA) through October 1, 2016. Prior provisions that grandfather taxes that existed prior to October 1, 1998 are also extended through October 1, 2016. For our previous news item on this topic, see Internet Tax Freedom Act Extended Until December 11, 2015. (H.R. 2029 – Consolidated Appropriations Act, 2016)

(01/18/2016)

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)

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