No Regulation Without Representation Act of 2016 Introduced

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.

Posted on August 22, 2016