House Introduces Online Sales Simplicity and Small Business Relief Act of 2018

On September 13, 2018, Rep. Jim Sensenbrenner (R-WI) and additional U.S. House members introduced the Online Sales Simplicity and Small Business Relief Act of 2018. The bill was filed in response to the U.S. Supreme Court’s June 21, 2018 decision in South Dakota v. Wayfair. Per the introduced legislation, a state would not be allowed to impose a sales tax collection duty on remote sellers for any sale that occurred prior to June 21, 2018. A state would be allowed to impose a sales tax collection duty on remote sellers only for sales occurring after January 1, 2019.

The legislation includes a small business remote seller exception. For sales made by a “small business remote seller,” states would not be allowed to impose a sales tax collection duty on any person other than the purchaser if the sale is made on or after June 21, 2018, and before the date that is 30 days after the date on which the states develop and Congress approves an interstate compact governing the imposition of tax collection duties on remote sellers. The legislation defines ‘‘small business remote seller’’ as “a remote seller with gross annual receipts in the United States during the preceding calendar year in an amount that is not more than $10,000,000.”

Per the legislation, “It is the sense of Congress that the States should develop an interstate compact for the collection of sales tax by remote sellers that identifies a clearly defined minimum substantial nexus between the remote seller and the taxing State, that simplifies registration, collection, remittance, auditing, and other compliance processes to the greatest extent possible in order to avoid undue burdens on interstate commerce…”

The legislation defines “remote seller” as “a person without a physical presence in the State who makes a sale in the State.” “Physical presence” in a state includes:

• Being an individual physically in the state or assigning one or more employees to be in the state.
• Using the services of an agent (excluding an employee) to establish or maintain a market in the state, if such agent does not perform business services in the state for any other person during such taxable year.
• The leasing or owning of tangible personal property (other than digital or alphanumeric data) or of real property in the state.

A person would not have physical presence in a state if the person’s physical presence in the state (as outlined above) was for less than 15 days in a taxable year (or a greater number of days if provided by state law), or if the person’s physical presence in the state was solely for the purpose of conducting limited or transient business activity.

The legislation defines ‘‘sales tax collection duty’’ as:

• an obligation imposed on a person, including a person other than the actual seller, to pay or collect a sales, use, or similar tax upon the sale of a good or service; or report any information with respect to such sale of a good or service; or
• the assessment of a sales, use or similar tax on a person.

It is unclear how this bill would impact states that have already enacted economic nexus provisions particularly that will be effective prior to passage of this bill.

(H.R. 6824: Online Sales Simplicity and Small Business Relief Act of 2018)