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On March 10, 2015, a bipartisan group of senators introduced the Marketplace Fairness Act of 2015. Similar legislation – the Marketplace Fairness Act of 2013 – was previously introduced in February 2013 and passed by the Senate on May 6, 2013. That legislation failed to be enacted. If passed, the Marketplace Fairness Act of 2015 would authorize states meeting certain requirements to require remote sellers that do not meet a "small seller exception" to collect their state and local sales and use taxes. For more information on the previous legislation, visit Federal Government Introduces New Remote Seller Bill. (Marketplace Fairness Act of 2015, March 10, 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.


On December 16, 2014, President Barack Obama signed the Consolidated and Further Continuing Appropriations Act, 2015, for sales and use tax purposes. The Act includes a provision that extends the Internet Tax Freedom Act (ITFA) until October 1, 2015 with all provisions unchanged.


On January 9, 2015, the House of Representative introduced a bill (un-numbered) that would permanently extend the ITFA, banning states and local jurisdictions from imposing any new tax on internet access. The proposed bill removes the current effective dates of November 1, 2003 through October 1, 2015 and changes the effective date to be effective for new taxes imposed after the date of the enactment.  It is not clear if states that have been grandfathered under the existing provision could retain their current tax on internet access but it appears that may be the case.  No formal legislation has been introduced that would incorporate the Marketplace Fairness Act into this bill. The bill is sponsored by House Judiciary Committee Chairman Bob Goodlatte, among others.


For our previous news item on this topic, see Internet Tax Freedom Act is Extended Through December 11, 2014.


For an update on this news item, see Internet Tax Freedom Act Extended Until December 11, 2015.


(Consolidated and Further Continuing Appropriations Act, 2015; H.R. 235)


A taxpayer’s sales of prewritten computer software and related services as part of the sale of a  medical system, billed on the same invoice with taxable computer hardware and other equipment, were subject to Virginia sales and use tax even though the software was delivered electronically. The software was either downloaded directly to the computer equipment sold to the customer or was downloaded to a thumb drive from which a technician employed by the taxpayer then transferred the software to the customer’s equipment onsite. Electronically delivered software is generally not subject to sales and use tax in Virginia. However, the relevant exemption only applies to services that do not involve the exchange of tangible personal property. While the software was delivered electronically, the software and related services were an integral part of the sale of the medical system, which is tangible personal property. As a result, the software and services were properly included in the taxable sales price of the system.Additionally, the seller did not meet the minimum requirements for certification of electronic delivery which require a sales invoice, contract or other type of sales agreement must expressly certify the electronic delivery of the software and that no tangible medium for that software will be furnished to the customer. The documentation is required because the exemption does not apply if the software is provided to the customer in a tangible form, such as a disc or tape, before or after the electronic download of the same software. (Ruling of Commissioner, P.D. 14-178, Virginia Department of Taxation, October 23, 2014)


President Barack Obama has signed federal legislation extending the Internet Tax Freedom Act (ITFA) through December 11, 2014 as part of the joint resolution which made continuing appropriations for fiscal year 2015. The ITFA was previously set to expire on November 1, 2014. The ITFA bars state and local governments from imposing multiple or discriminatory taxes on electronic commerce and taxes on Internet access.


For an update to this news item, see Internet Tax Freedom Act Extended Until October 1, 2015, Permanent Extension Introduced.


(P.L. 113-164 (H.J. Res. 124), 113th Congress, 2nd Session, Laws 2014)


Virginia has ruled that a cabinet installer is a contractor, and not a retailer, for sales and use tax purposes, and must pay sales tax on its purchases of cabinets installed for customers. The taxpayer contended that it meets Virginia’s three-pronged retailer test because it maintains a retail or wholesale place of business, performs installation, and maintains an inventory of materials that enter into or become a component part of the shelving. The taxpayer was not able to show that it maintains an inventory of materials. The cabinets and shelving units stored by the taxpayer until installed do not qualify as inventory. The Department of Taxation has consistently held that the purchase of equipment on a job-to-job basis that is temporarily stored in a warehouse until it is ready to be delivered and installed does not constitute inventory. While the taxpayer occasionally installs trim pieces or modifies shelves using a supply of parts for this purpose, these parts would not qualify as inventory because they constitute only a few of the parts necessary to fabricate the finished cabinets. Since the taxpayer does not meet all of the criteria of the retailer definition, it cannot be classified as a retailer and is deemed a contractor with regard to these transactions. Since it is a contractor, the taxpayer is liable for tax on purchases of tangible personal property furnished in connection with its installation contracts. The taxpayer is also prohibited from charging customers sales tax on the invoiced cost of shelving and cabinets, regardless of whether the installation charge is included in the total project price, separately stated, or calculated and provided to the customer, but not separately stated. (Ruling of Commissioner, P.D. 13-204, Virginia Department of Taxation, November 1, 2013)



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