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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)

Washington has provided guidance on the new nexus standards that apply to out-of-state sellers making sales in Washington. Effective September 1, 2015, out-of-state sellers making wholesale sales into Washington will be liable for wholesaling business and occupation (B&O) tax on sales delivered into the state for the current year if they meet any of the economic nexus thresholds during the prior calendar year. An out-of-state wholesaler will have economic nexus if it has:

 

  • More than $267,000 in gross income in Washington;
  • More than $53,000 of payroll in Washington; 
  • More than $53,000 of property in Washington; or
  • At least 25% of total property, payroll, or income in Washington.

 

To determine if a wholesaler exceeds the $267,000 gross income threshold, both apportionable income attributable to the state and wholesale sales delivered to Washington are included.

 

Effective September 1, 2015, a click-through nexus standard will apply for retailing B&O tax and sales tax purposes. An out-of-state seller will be presumed to have nexus with Washington if it:

 

  • Enters into agreements with Washington residents and pays a commission or other consideration for referrals via a website link or otherwise; and
  • Has more than $10,000 in sales into Washington during the prior calendar year due to these agreements.

 

The click-through presumption may be rebutted by showing that each in-state resident with whom the retailer had an agreement was prohibited from engaging in solicitation activities on behalf of the retailer and did not engage in such solicitation.

 

For our previous news item on this topic, visit Washington Enacts Click-Through and Economic Nexus Provisions.

 

(Tax Topics: New Nexus Standards for Wholesale and Retail Sales — Effective September 1, 2015, Washington Department of Revenue, August 18, 2015)

(08/25/2015)

Washington’s sales and use tax exemption for eligible server equipment and power infrastructure installed in certain computer data centers has been extended to apply to a data center constructed between July 1, 2015 and July 1, 2025. For data centers constructed during this period, replacement server equipment must be installed within 12 years after the date of the certificate of occupancy in order to qualify for the exemption. For a data center built between March 31, 2012 and July 1, 2015, replacement server equipment must be installed before April 1, 2024. For data centers that commenced construction after July 1, 2015 but before July 1, 2019, the exemption is limited to eight data centers, with the total eligible data centers limited to 12 from July 1, 2015 through July 1, 2025. The exemption is available on a first-in-time basis based on the application date. (S.B. 6057, Laws 2015)

(08/24/2015)

Effective August 1, 2015, Washington is expanding its sales and use tax exemption for manufacturing machinery and equipment to include certain software developers. Software manufacturers that deliver prewritten software to customers electronically qualify for the exemption for machinery and equipment used directly in a manufacturing, research and development, or testing operation. Members of an affiliated group are not eligible for exemption when the following apply: at least one member of the group was registered with the Department of Revenue on or before July 1, 1981; as of August 1, 2015, the combined employment in Washington of the group exceeded 40,000 full-time and part-time employees; and the business activities of the group primarily involve development, sales, and licensing of computer software and services.(Special Notice, Washington Department of Revenue, July 27, 2015)

(08/24/2015)

Washington has enacted legislation that includes both click-through and economic nexus provisions for sellers. Effective September 1, 2015, a seller is presumed to have substantial nexus in Washingtonfor sales and use tax purposes if the seller enters into an agreement with one or more residents under which the resident, for a commission or other consideration, directly or indirectly, refers potential customers, by a website link or otherwise, to the seller. In order for the presumption to apply, cumulative gross receipts from sales by the seller to customers in the state who are referred to the seller must exceed $10,000 during the preceding calendar year. The presumption can be rebutted by demonstrating that the residents with whom the seller had agreements did not engage in solicitation on behalf of the remote seller that would satisfy the nexus requirements of the U.S. Constitution during the calendar year. Remote sellers engaging in such agreements with state residents will be presumed to have substantial nexus with Washington for purposes of the Business and Occupation (B&O) taxand taxed under the retailing business and occupation tax classification.

 

An additional provision was enacted that imposes an economic nexus standard for the Business and Occupation tax only.  Effective September 1, 2015, economic nexus provisions also apply for purposes of B&O tax on out-of-state businesses making wholesale sales in Washington. Economic nexus will apply to remote sellers that in the immediately preceding tax year had:

 

  • More than $50,000 of property in Washington (which includes the average value of property including intangible property, owned or rented and used in the state during the immediately preceding tax year) ;
  • More than $50,000 of payroll in Washington;
  • More than $250,000 of receipts from Washington; or
  • At least 25% of the person’s total property, total payroll, or total receipts in the state.

 

For an update on this news item, visit Washington Issues Guidance on Changes to Nexus Standards.

 

(S.B. 6138, Laws 2015, effective as noted)

(07/16/2015)

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