It’s a new year and that means there are new changes to sales tax laws — both state and federal. This year, online sales tax is a big issue. No one can say for certain what Congress will do about the issue either.
Changes to online sales tax laws have the ability to completely reshape how business is done. Currently, there are four pieces of online sales tax legislation awaiting consideration. Below, they are broken down so you can get a better understanding of each.
1. Marketplace Fairness Act of 2015
This is a revised Marketplace Fairness Act (MFA) bill introduced by a few members of Congress in 2015. If passed, the MFA would broaden state authority to require remote sellers to collect sales tax regardless of whether that business has a physical presence within those states. However, the MFA wouldn’t override current state and local laws surrounding product and service taxability, tax holidays, exemptions, or related rates, boundaries and rules.
Also, the MFA would authorize states to require remote sellers to collect and remit sales tax as long as
- the state is in full compliance with Streamlined Sales and Tax Use Agreement
- a member of the Streamlined Sales Tax organization
- the state implements a minimum set of simplification measures
2. Remote Transactions Parity Act of 2015
Under the Remote Transactions Parity Act (RTPA), the 23 states that are members of the Streamlined Sales Tax (SST) initiative would be authorized to require remote sellers to collect and remit sales tax soon after legislation is passed. Non-SST member states would have to adopt and implement certain minimum simplification requirements.
The RTPA is friendlier to smaller businesses because it applies to any business making more than $10 million annually and provides an exemption for catalog only sellers with no Internet presence.
3. Online Sales Simplification Act
The Online Sales Simplification Act (OSSA) has two key principles according to lawmakers: simplicity and No Regulation without Representation.
Under OSSA, a state would collect tax only on sales originating in the state, meaning the seller has a physical presence there. OSSA also imposes a formulaic “flat rate” for sellers within non-sales tax states and requires states to re-distribute taxes collected on remote sales to the destination states.
4. No Regulation Without Representation Act
The No Regulation without Representation Act would prevent states from taxing any seller that doesn’t have a physical presence in that state. This act would uphold the original intent of the 1992 Supreme Court case Quill Corp. vs. North Dakota. Bill sponsor Congressman Jim Sensenbrenner (R-Wis) explains that under his bill, a state cannot force a person to
- collect sales, use or similar tax;
- report the sale;
- or assess a tax on a person
The buyer must be physically present in the state during the relevant tax period in order for the state to tax him or her.
Changes to sales tax laws can affect the way marketers do their jobs. Stay on top of the proposed laws to make better marketing and business decisions.