Thursday, February 9, 2017

Online Sales Tax May See New Life in Congress

With the 115the Congress now seated, E-Retailers can expect Legislators to resurface the Online Sales Tax issue.

The last Congress included the introduction of the Remote Transactions Parity Act (RTPA) and the No Regulation Without Representation Act (NRWRA) in the House of Representatives, and the circulation of a draft for the Online Sales Tax Simplification Act (OSTSA) in the Judiciary Committee. The RTPA and NRWRA never came to a vote, and the latter was never introduced in the House. However, Congressional Leaders say they will continue to work on the issue as challenges from States mount.

Alabama, Colorado, and South Dakota, are openly challenging prevailing Federal Law, seeking to require Retailers to either Collect and Remit Sales Tax to their States or to turn over Residents’ purchase information to State authorities. In December, the U.S. Supreme Court let stand the Colorado Law that requires Internet Retailers to report purchases by Residents to the State.

Consumers are legally obligated to Pay Sales Tax to their Home State when they purchase Online, but few pay it if the retailer doesn’t collect it at checkout. That, and the growing amount of money being spent Online, has propelled a number of States to enact Legislation and file Lawsuits to make E-Retailers pay up. Prevailing Federal Law, the Supreme Court Quill Corp. v. North Dakota, 504 U.S. 298, requires Online and Catalog Retailers to collect Sales Tax only in States where they have a physical presence, also known as Nexus, such as a Sales Office, Warehouse, or State Sales Representatives. It did not cover the ability of a website to pass an order to an Amazon like company for a product and get a Commission on the Sale or a Commission for the Lead.

I was part of the Quill Case.

The hodgepodge of Laws and their varying requirements has forced the issue into Congress for the past several years, although no effort has been successful. The 2013 version of the Marketplace Fairness Act (MFA) passed in the Senate, but died in the House of Representatives. The sponsor of the MFA in the House, Rep. Steve Womack, R-Ark., continues to work on the issue.

“Congressman Womack was encouraged by leadership’s response to the Remote Transaction Parity Act, their rejuvenated efforts towards the end of last Congress to find an amiable solution, and their interest in closing the internet tax loophole once and for all,” says Claire Burghoff, press secretary for Womack. “He will continue to work with Chairman Chaffetz to make this a reality before the courts decide to make this decision for us.”

Rep. Jason Chaffetz, R-Utah, sponsored RTPA. The RTPA and the earlier iterations of the MFA required Retailers to calculate Sales Tax based on the Shipping destination of the Online Order and collect it during the Sale.

Rep. Jim Sensenbrenner, R-Wis., the Sponsor of the NRWRA, intends to reintroduce his Bill in this Congress, his office says. Unlike the other bills in play that seek to overturn the existing Law, the goal of the NRWRA is to codify the prevailing Law and limit States’ ability to impose a Use Tax or Sales Tax on Remote Sellers.

Inquiries about the future of the OSTSA to the Office of its Author, Rep. Bob Goodlatte, R-Va., were referred to the House Judiciary Committee, which Goodlatte Chairs. A Judiciary Committee aide says that negotiations on the Draft are ongoing and will continue to be discussed with Lawmakers in the new Congress. The OSTSA offered a more streamlined system to determine the Sales Tax, based on a Flat Rate per State rather than on smaller Jurisdictions, and would allow E-Retailers to remit the Collected Monies to their Home State Revenue office in the same manner they already remit Taxes collected on In-State sales.

During the Quill case, I put forth the concept of receiving 1% of the collected States Flat 5% Sales Tax as a Management Fee to collect and remit the collected Sales Tax. I even offered to develop the system at my cost. It was rejected by the States.

Steve DelBianco, Executive Director of NetChoice, a group that represents E-Retailers and actively Champions the OSTSA option, says he expects Congress to resurrect prior Legislation. “There is not yet movement towards a compromise bill, so I would expect reintroduction of each of the alternatives,” he says.

NYC Wins When Everyone Can Vote! Michael H. Drucker
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