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
Here’s the latest Internet sales tax news.
We’ve got more Internet sales tax news! You may recall that the Marketplace Fairness Act, which would allow states to collect sales tax from purchases made online, passed in the Senate in 2013 but never made it to the House floor. At the end of the 2014 session, House Speaker John Boehner voiced, “significant concerns about the bill,” and tabled it indefinitely.
Although it sounds like the Marketplace Fairness Act is dead, the topic of Internet sales tax is far from over. House Judiciary Chairman Bob Goodlatte circulated a discussion draft about online sales tax that is meant to be a way to re-start the conversation. Continue reading