- By Althea
- With No Comments
- On 9 Jul | '2015
New House Bill Rekindles Debate on Online Sales Tax
The Remote Transaction Parity Act
On June 15, 2015, a bill known as the Remote Transaction Parity Act/RTPA, was introduced in the House by Representative Jason Chaffetz. The bill seems set to reinvigorate and intensify the debate about Internet sales tax. It will surely pit lawmaker against lawmaker.
Jason Chaffetz (R-UT) is the chairman of the House Oversight and Government Reform Committee. He anticipates that the bill will modernize the outdated process by which the country collects sales taxes. He wants the new bill to promote the rights of each state.
Physical Stores versus Online Retailers
Chaffetz also wants sales tax parity between brick-and-mortar stores and online retailers who operate remotely. A remote transaction is a sale that is conducted in one state and delivered to a consumer in another state. It does not involve the collection of sales taxes.
Draft Bill Provisos
According to a draft of the bill that was obtained from Chaffetz’s website, the following provisos are included:
– Audits, and the collection of remote sales taxes, will be conducted by a designated state administrator.
– Each state will enact a law for the collection of sales taxes. The law will specify what exactly the tax covers.
– Each state will create a publicly-available tax and exemption table that can be downloaded. Rates and boundary databases must also be provided.
– The tables and databases will be accessed by nationally certified software providers. The providers will generate tax returns and respond to audits. They will also remit the taxes from the remote sales to the appropriate states. They will report each transaction to the remote seller whilst protecting consumer privacy.
– Any notice of under- or over-collection of taxes will be subject to time limits. There will also be a statute of limitation.
– Software providers and sellers will not be liable for any incorrect remittance or tax collection in cases where they have been misinformed.
– If sellers gross more than $10 million in the calendar year that precedes enactment of the law, states can collect remote sales taxes in the first year of the law. The gross amount of earnings is reduced to a minimum of $5 million in the second year and a minimum of $1 million in the third year.
– The thresholds given above will be based on sellers meeting certain subsections of the Internal Revenue Code.
– Sellers operating remotely will only be subject to sales and use taxes.
– The act will not encourage states to impose any new taxes.
– The act will not apply to sales within states. It will apply to sales between one state and another.
– States will only be able to collect remote taxes if they have established certification procedures for software providers. In addition, each state must certify a number of national software providers.
Precedence and U.S. Supreme Court Rulings
The issue of remote sales tax rises above political wrangling. Precedence can be found in a number of U.S. Supreme Court rulings that concern remote sellers and sales taxes.
• 1967: The Supreme Court ruled that a state cannot require the collection of use taxes under the commerce clause if the business does not have a physical presence in the state. Use taxes equate to sales taxes imposed on purchases made out-of-state. Even though taxes are due, the onus is on customers to pay them.
• 1992: In Quill Corp. versus North Dakota, the Supreme Court upheld the physical location requirement.
Challenges to the U.S. Supreme Court Rulings
Justice Anthony Kennedy challenged the above rulings in March, 2015. He wrote that the Quill ruling is harmful and unfair to the states. Kennedy noted that the Internet was a fairly new entity in 1992. However, by 2008, online sales were totaling $3.16 trillion each year in the United States.
Kennedy wrote that consumer access to modern technology means that the business model has changed. He pointed out that physical presence should no longer be a requirement for the collection of sales taxes. Kennedy argued that the changes in business operations should herald a reconsideration of the Supreme Court rulings. He called on the legal system to find suitable precedence for requiring the Supreme Court to take a fresh look at its earlier findings.
Kennedy’s challenge to the Supreme Court ruling and Chaffetz’s bill mean that the issue of Internet sales taxes will remain a hot topic. The issue is not likely to be resolved quickly.
I’m a Tax Pro based in Nebraska. I love to cover Tax and Accounting topics. I’m a businessperson, and enjoy chatting with individuals who run companies and help the economy along. I trust you enjoyed my column. Please do not hesitate to send me opinions. As a side note, if you are going to e-File 1099’s and other tax forms this year, give http://www.efile4biz.com a try.
These guys will file 1099 online, along with other docs, including handling printing and posting the paper docs to your sub-contractors. They’re an industry thought leader and are ahead of the pack when it comes down to data safety in the online software market.