How is Massachusetts approaching online sales tax? This post explains!
Over the last couple of months we’ve been taking a closer look at how various states are approaching the issue of online sales tax. Some states, like Washington and Nevada, have enacted “Amazon Laws” that make some retailers responsible for collecting and remitting state sales tax. Other states, such as Arizona, haven’t created new legislation directly about the issue yet and seem to be waiting to see how the debate is settled, either in Congress or through other states’ laws.
Today we look at a state that has been a little bit slower to enact online sales tax legislation, but is starting to make changes internet retailers need to know about: Massachusetts. Keep reading for the details. Continue reading
How does New York approach online sales tax? This blog post explains.
Overall, the topic of collecting online sales tax is not as cut and dry as some would first assume, with ambiguous meanings and regulations, often confusing business owners. And hopefully, that’s where we come in to help!
In our series we have talked about multiple states, including Nevada, Washington and Colorado, and how each one handles the issue surrounding online sales tax for their state; up next in the lineup is New York.
A Summary of New York’s Online Sales Tax Law
New York was the first state in the country to enact a law for larger internet retailers (back in 2008). This law is referred to as the “Amazon Law,” based on the large internet retailer that used to have physical presence in very few states and therefore wasn’t required to collect sales tax. Amazon has now changed its business model and has worked with many states to collect sales tax. However, over the past several years, many states enacted “Amazon Laws” or “click through” statutes to get ahead of the company and internet retailers. New York was simply the first! Continue reading
How does Arizona approach online sales tax? This blog post explains!
Have you been following our series on how states are approaching the online sales tax debate? So far we’ve taken a look at Colorado, Alabama, Washington and Texas; today we look at Arizona! Keep reading to see how the Grand Canyon State is approaching the issue.
A Summary of Arizona’s Online Sales Tax Legislation
Unlike the other states we’ve covered so far, Arizona interprets the 1992 court case, Quill Corp. v. North Dakota, a little bit more directly. The precedent set forth established that companies need to have a physical presence in the state (or nexus) in order for the state to collect sales tax on a purchase.
While many states establish economic nexus through a variety of provisions, Arizona’s 2015 Tax Handbook clearly states that physical presence as defined by Quill is key. And, as Nolo.com points out, “According to the same section, a company with no physical presence in the state, but whose products are both available in independently-owned Arizona stores and directly from the company via the internet, is not responsible for collecting sales tax.” Continue reading
How is Alabama approaching online sales tax? This post explains.
A couple of weeks ago we started a series that looks at the ramifications of various online sales tax legislation states across the country are proposing and signing into law. We started with Colorado as they’ve been at the forefront of the debate since 2010. Today we take a look at Alabama!
Alabama has been making waves in the state tax world because it passed legislation in 2015 that requires an out-of-state seller making retail sales within the state to register, and collect and remit sales tax on these sales by virtue of “economic nexus” if the seller has sales of more than $250,000 within Alabama, and engages in certain limited activities in the state. However, it does not require substantial physical presence as required in the 1992 Supreme Court decision (Quill). With the passage of these laws, Alabama drafted legislation that is unconstitutional and effectively challenging taxpayers to take the issue to court (or is challenging the federal government to finally enact some of the bills which have been circulating in Congress but have not passed). Whether that’s “simplified” or not is a question, but read on for a summary of the latest activities in the state. Continue reading
Are you keeping up with the online sales tax debate?
Have you been keeping up with the online sales tax debate? Are you curious which pieces of internet sales tax legislation are still circulating in Congress? Here’s a quick summary of the current bills we’ve been watching, and the pros and cons for each one.
The Marketplace Fairness Act of 2015
Unveiled in March 2015, this version of the Marketplace Fairness Act is similar to its 2013 predecessor with a few notable changes, requiring out-of-state companies to collect sales and use tax just like local businesses already do.
- It has a small seller exception (it does not apply to small businesses selling less than $1 million online).
- It creates an environment where the states would ultimately have to become more uniform in order to participate, thus creating some simplification.
- The implementation dates are confusing.
- It relies too heavily on Streamlined Sales Tax states.
- Conforming of non-Streamlined Sales Tax states would take a long time, and it’s unlikely there would ever be true conformity.
- It requires internet sellers to do a lot of research into sales and use taxes for online customers.
- It doesn’t address more complicated matters such as re-sales, audits, etc.
This new legislation massively expands the authority of states’ tax collection.
Cash register used to compute sales tax
For several years, the online sales tax debate has been tossed around Capitol Hill, but has gained little traction in Congress. However, two new bills introduced recently add some new fodder for discussion. One bill makes it harder to impose sales tax, while the other makes it much easier. Will either pass?
No Regulation Without Representation
Representative Jim Sensenbrenner, a republican from Wisconsin, introduced a new bill to Congress in July that would prevent states from taxing any seller lacking a physical presence. This bill is called the No Regulation Without Representation Act of 2016 (H.R. 5893).
Under this bill, unless the person is physically present in a given state during the relevant tax period, a state may not obligate a person to:
- Collect a sales, use or similar tax
- Report the sale
- Assess a tax on a person
- Treat the person as doing business in a state for purposes of such tax
Have you heard about South Dakota’s latest move regarding the online sales tax debate?
Last month we discussed how two states, Louisiana and Alabama, are taking matters into their own hands regarding the online sales tax debate. Now another state, South Dakota, is forcing the issue.
South Dakota’s Case Regarding Online Sales Tax
If you recall from our previous posts about the online sales tax debate, states are frustrated that they can’t collect the revenue from purchases made via the internet, and retailers claim it’s too difficult to keep track of the wide variety of tax codes for every single state, county and municipality – especially for small internet retailers.
Instead of waiting for Congress to come to some sort of agreement, South Dakota has taken matters into their own hands by passing Senate Bill 106, allowing the state to collect taxes from sales made from online retailers – even if they don’t have nexus within South Dakota itself. This challenges the 1992 ruling in Quill Corp. v. North Dakota, in which the U.S. Supreme Court ruled that only businesses with an actual physical presence in the state (or nexus) needed to collect sales tax from residents. Continue reading
How do cloud-based services fit into the online sales tax debate?
We’ve written about online sales tax multiple times before, but it’s a complicated topic without a simple solution. And that’s why we keep coming back to it! In the past we’ve discussed how states are attempting to extend the definition of nexus to broaden their online tax reach, or potential legislation coming through Congress. But one area we haven’t really taken a look at is the question of cloud-based services. How do they fit into the online sales tax debate?
About Cloud-Based Services
More and more, consumers are opting for digital versions of software, music, DVDs and games over physical copies. They purchase the rights to use these goods online and stream them directly from the “cloud” to their computer, tablet or smartphone without ever holding a tangible item that can be taxed in the traditional manner.
Consumers aren’t the only ones relying on the cloud. Businesses are continuing to move their company’s storage to the ominous “cloud,” hiring third-party cloud-based organizations rather than needing to rely on their own data-management. Many companies are therefore entering the software-as-a-service (“SaaS”) models. Continue reading
What do you think of Washington State’s Internet sales tax plan?
If you’ve been following the Internet sales tax debate, you know that taxing online transactions is one way that lawmakers foresee increasing state revenue. Still, they can’t start collecting online sales tax until Congress passes federal legislation to mandate and enforce a change in procedure for on-line retailers. Or can they?
Legislators in Washington State’s House created a plan that would allow the state to collect tax from online sales. Because Internet shoppers are supposed to be paying use taxes based on sales taxes they don’t pay from an online purchase, this legislation could be considered simply enforcing existing law.
Washington’s Five-Point Internet Sales Tax Solution
The plan basically expands the definition of “nexus” to prompt online sales tax collection in five areas. Continue reading
Don’t miss the latest Internet sales tax news!
Did you hear the latest in Internet sales tax news? The Marketplace Fairness Act of 2015 was unveiled earlier this month, and it seems to have support from both sides of the aisle. (Ah, yes, but haven’t we heard that before?) The new Act is substantially similar to the 2013 version, but the 2015 version, prohibits states from imposing collection requirements on remote sellers prior to one year after Marketplace Fairness is enacted (versus 180 days), or during the busy holiday retail season between October and December of the first calendar year that Marketplace Fairness Act is enacted.
The legislation would give states the option to require out-of-state businesses to collect and use taxes the same way local businesses do. This would especially impact online sellers and consumers in the form of paying online sales tax. Continue reading