Where are we headed with remote sales tax legislation? Repost from Avalara
If tax-free online shopping ends in 2017, what are the implications to your business? Classy Llama and Avalara want to make sure cart compliance makes your list for year-end planning meetings.
This blog post will give you a quick snapshot of information concerning the Sales Simplification Act and what it means for your business. Our free eBook: The Online Sales Tax Showdown provides a more detailed look at the sales tax situation for online retailers today, the proposals in play, and their likely impact for retailers of all types and sizes next year.
The issue of remote sales tax remains a divisive one among federal lawmakers. The 2015 Online Sales Simplification Act (OSSA) draft never became a bill, and OSSA 2016 exists in draft form only. OSSA could go the way of the Marketplace Fairness Act and the Remote Transactions Parity Act (thus far, nowhere). Or it could drum up support for the No Regulation without Representation Act of 2016, an anti-remote sales tax bill that was introduced in July.
Yet change in remote sales tax policy doesn’t necessarily depend on federal legislators. Numerous states have enacted affiliate and click-through nexus laws, under which certain remote retailers trigger a sales and use tax obligation through affiliate relationships and/or links on websites owned by state residents. In addition, new economic nexus laws in Alabama and South Dakota are challenging the physical requirement precedent upheld by the 1992 United States Supreme Court decision in Quill Corp. v. North Dakota. Both states are being sued over their policies and both hope to take their cases to Supreme Court, which they hope will overturn Quill and grant states the authority to tax certain remote sales.
Instead of challenging or expanding the definition of nexus, Colorado and Vermont have imposed use tax reporting requirements on remote retailers to attempt to increase use tax compliance. States are entitled to tax revenue from taxable remote sales — when sales tax isn’t collected by a retailer, consumers are supposed to remit use tax to the state. Yet individual use tax compliance is low, and enforcement is difficult. It remains to be seen whether the policies in Colorado and Vermont will be effective.
In short, a majority of states want remote sales tax revenue, and lawmakers will continue to push for it in state capitols and on Capitol Hill. There is no guarantee their efforts will be successful; if they are, what remote sales tax compliance will look like from state to state is unknown.
For a more in-depth look at this topic, download a copy of The Online Sales Tax Showdown, a special report by Internet Retailer with support from Avalara that looks at what federal sales tax legislation could mean for US retailers and other sellers.