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US Retail Groups Press For Online Sales Tax Legislation

by Mike Godfrey,, Washington

18 March 2016

On March 15, more than 20 business associations in the United States sent a letter to Robert Goodlatte (R – Virginia), the Chairman of the House of Representatives Committee on the Judiciary, urging that he should markup legislation to give states the option of levying sales taxes on internet transactions.

In the letter, the associations – including many retail groups such as the International Council of Shopping Centers, National Retail Federation, and Retail Industry Leaders Association – pointed out that "because the Congress has not passed remote sales tax legislation, numerous states have enacted or are considering varied approaches to collecting these current tax obligations. In some cases, states may also be pursuing back-taxes."

They added that "the lack of movement from Congress on the issue of remote sales tax collection has left states, local governments, and our merchants with no choice but to seek disjointed and confusing remedies through individual state activity. … This state-by-state approach prevents businesses from benefiting from simplification measures such as uniform definitions or free tax software that could be achieved by federal legislation."

"We do not believe that the state-by-state approach is the best solution, which is why we are hopeful the House of Representatives will vote on a federal legislative solution this year to move this issue toward a final resolution," they concluded.

The House Judiciary Committee has responsibility in developing online sales tax legislation because of the interstate commerce nexus it would involve. Currently, retailers are only required to collect sales tax in US states where they also have brick-and-mortar stores (that is, a physical nexus).

A previous legislative attempt to change the position, the Marketplace Fairness Act (MFA), was approved by the then Democrat-led Senate in May 2013. The MFA would have given states the option to require online retailers with national annual sales greater than USD1m to collect the tax, even if their websites lacked a physical nexus in the state.

The MFA was then sent for approval to the Republican-led House where it encountered a great deal of opposition, particularly on the grounds that it was considered to create new taxation and onerous compliance requirements. Early last year, Goodlatte proposed an alternative system of taxing "remote sales" based on where the retailer – not the customer – is located, but that proposal also encountered criticism.

In their letter, the associations confirmed that they would be able to support the Remote Transactions Parity Act (RTPA), which was introduced in the House in June last year and includes several modifications over the MFA.

Instead of USD1m, the RTPA exempts small business under USD10m in the first year. This would be lowered to USD5m in the second year and to USD1m in the third.

It would also exempt businesses with under USD5m in gross receipts from audits in states where they do not have a physical nexus. States would be called on to give remote sellers the software needed to collect and remit the taxes due, and to pay for its setup, installation, and maintenance costs.

TAGS: compliance | tax | small business | business | sales tax | tax compliance | commerce | law | internet | e-commerce | legislation | United States | retail

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