We didn’t keep it a secret that we here at TaxJar were no fans of the Marketplace Fairness Act (MFA). For that matter, we’re no fans of Internet sales tax or anything that will make it harder for small businesses to drive the world economy. So we were thrilled when Congress announced they wouldn’t vote on the MFA in this legislative year.
But the death of the MFA doesn’t mean that the idea of an Internet sales tax is dead. In fact, Rep. Jason Chaffetz, (R-Utah) has already promised to introduce new legislation to bring the idea of Internet sales tax back into the public forum.
This new bill is rumored to be called the Remote Transaction Parity Act. No public version of this bill has been presented to Congress, but according to Chaffetz it would be similar to the MFA in that it would require remote sellers to collect sales tax from buyers.
“I think [the Report Transaction Parity Act] will be very palatable to both sides of the aisle,” Chaffetz told the website Tax Analysts following the meeting. “It really clarifies a number of things that people thought were wrong with the MFA. It just makes it a better bill.”
Of course, our concern was always the effect that any new legislation in this area would have on small business. Neil Osten of the bipartisan National Conference of State Legislatures (NCLS) also told Tax Analysts: “If any small business had a concern about MFA, this will take away their concerns. There is language in the draft bill that would reduce the burden of audits on small businesses.”
In the meantime, the trend to watch is individual states taking matters into their own hands. States are still suffering from a revenue crunch and looking for ways to collect sales tax from remote sellers even without a Federal law. The state of Michigan, for example, is seeking to redefine what constitutes nexus in their state. The state senate passed a measure that would broaden sales tax the definition of sales tax nexus in Michigan to include retailers who advertise in Michigan or use an in-state delivery service. The measure now moves on to the Michigan House.
The Supreme Court recently heard a case from the state of Colorado concerning requiring remote sellers to report sales to the state so that Colorado could require in-state buyers to pay use tax on remote sales. The Supreme Court is currently contemplating their decision. If they allow Colorado to require extra reporting from merchants, this could open the door for more burdensome compliance for online sellers.
So here’s where things stand now for those of you keeping an eye on sales tax law…
1.) The Marketplace Fairness Act is dead, but the concept of Internet sales tax is alive and kicking.
2.) We’ll soon have a new bill trying to make its way through Congress. This bill claims to alleviate the worries of small business when it comes to Internet sales tax and sales tax compliance. I, for one, will believe it when I see it.
3.) It may not matter if Federal legislation passes. It’s clear that states are seeking new ways to collect tax on sales, whether it’s from sales tax collected and remitted by merchants or use tax paid to the state’s treasury by in-state buyers.
4.) For now, eCommerce sellers are still required to become and stay compliant with current state-level sales tax with a threat of eventual Federal legislation.
Do you have thoughts, opinions or new information on the state of internet sales tax? Start the conversation in the comments.