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Will Congress Act on Digital Sales Tax?


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7/31/2018
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Will Congress Act on Digital Sales Tax?

The Multistate Tax Commission issued a resolution on July 25, 2016 asking Congress to hold-off on legislation reversing the Wayfair ruling and setting uniform national rules for digital sales taxes.  Resolution 2018-01 urges Congress to wait for states to enter into a Streamlined Sales and Use Tax Agreement to simplify the administrative toll on small business.  If Congress were to pass legislation placing limitations on how state’s collect sales tax (especially digitally), that legislation would “preempt” state statutes if it “fully occupied the field.”  Congress derives this unfettered power to preempt state taxation from the Commerce Clause in the U.S. Constitution. 

“Senator Bramble expressed the frustration of many states, that Congress has been given multiple times to act,” and yet hasn’t, John Valentine, chair of the Multi-state Tax Commission (“MTC”).  John Valentine is also the Utah State Tax Commissioner.  He noted that, “States have been working very hard to address the situation the Supreme Court left us with.”

What is being called for is a system of sales tax simplification and uniformity among the states.  With over 17,000 sales tax jurisdictions in one study, and with Vertex, a reputable software tax vendor, identifying no less than 9,998 separate sales tax jurisdictions, the “complexity” and “diversity” of sales tax programs a small-business with national reach must navigate is tremendous and creates barriers to competition against larger corporations with the wherewithal to manage such complexity.

The Streamlined Sales and Use Tax Agreement (“SSUTA”) is one solution.

While a number of blue states have sprung into action to begin collecting online or digital sales tax, the National Conference of State Legislatures (“NCSL”) urges restraint and rolling out new laws properly with an opportunity for public comment as well as time to fine tune the systems being put in place. “States should ensure that they are fully prepared” before beginning to enforce their sales tax laws on remote sellers” and should consider waiting until Jan. 1, 2019, “to begin sales tax collection requirements on remote sellers,” the NCSL said in a list of considerations.

Max Behlke, director of budget and tax for the NCSL.  “Waiting even 30 to 60 days before implementing instead of rushing into enactment will give a state’s department of revenue and vendors selling into the state time to adjust and prepare,” Behlke said.  The NCSL also cautions that advanced notice to practitioners is strongly recommended as they will be the ones predominantly ensuring front-line compliance with new legal nexus requirements.

Bloomberg compiled a fairly comprehensive list of the state digital sales tax laws that hang in the balance and whose enforcement was contingent on Wayfair and is in some way impacted by the decision on remand in South Dakota:

  • Alabama (Jan. 1, 2016), $250,000 in in-state sales
  •  Connecticut (Dec. 1, 2018), 200 transactions or $250,000 in in-state sales
  •  Georgia (Jan. 1, 2019), 200 transactions or $250,000 in in-state sales
  •  Hawaii (July 1, 2018), 200 transactions or $100,000 in in-state sales
  •  Illinois (Oct. 1, 2018), 200 transactions or $100,000 in in-state sales
  •  Indiana (July 1, 2017), 200 transactions or $100,000 in in-state sales
  •  Iowa (Jan. 1, 2019), 200 transactions or $100,000 in in-state sales
  •  Kentucky (July 1, 2018), 200 transactions or $100,000 in in-state sales
  •  Louisiana (contingent on Wayfair ruling), 200 transactions or $100,000 in in-state sales
  •  Maine (Oct. 1, 2017), 200 transactions or $100,000 in in-state sales
  •  Minnesota (contingent on Wayfair ruling), 100 transactions or $100,000 in in-state sales in at least 10 transactions
  •  Mississippi (Dec. 1, 2017), $250,000 in in-state sales
  •  North Dakota (contingent on Wayfair ruling), 200 transactions or $100,000 in in-state sales
  •  Oklahoma (July 1, 2018), $10,000 in in-state sales
  •  Pennsylvania (March 1, 2018), $10,000 in in-state sales
  •  Rhode Island (Aug. 17, 2017), 200 transactions or $100,000 in in-state sales
  •  South Dakota (contingent on state Supreme Court’s approval, following high court Wayfair decision), 200 transactions or $100,000 in in-state sales
  •  Tennessee (currently on hold due to litigation), $500,000 in in-state sales
  •  Vermont (contingent on Wayfair ruling July 1, 2017), 200 transactions or $100,000 in in-state sales
  •  Washington (July 1, 2017), $10,000 in in-state sales
  •  Wyoming (July 1, 2017), 200 transactions or $100,000 in in-state sales

https://www.bna.com/goodlatte-wayfair-ruling-n73014481035/

https://www.bna.com/multistate-group-tells-n73014481090/

https://www.bna.com/dont-act-congress-n73014481036/

https://taxfoundation.org/state-sales-tax-jurisdictions-approach-10000/

https://www.bna.com/state-group-advises-n73014477051/

https://www.bna.com/state-group-advises-n73014477051/



Category: Tax Law


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