After the Supreme Court handed down it’s ruling in Wayfair, states began a mad scramble to roll out new and improved ecollection laws and regulations without delay. The upset in the marketplace has the feds saying let’s slow down in two new pieces of legislation in Congress. Each attempts to create more orderly esales tax collections as states claim their new tax powers.
Introduced Sept. 6, this Act would limit the authority of a State to require remote sellers to collect taxes and fees owed by purchasers then located in such State incident to their purchases of goods and services from such sellers, and for other purposes. States would not be able to start requiring esale tax collections from out-of-state vendors until next year. The Act would also bar retroactive collections from out-of-state vendors that don’t have physical presence in the state.
States that want to collect sales taxes from out-of-state vendors without physical presence could only do so if the state enacts legislation mandating certain conditions. The conditions are that the states: have a statewide uniform tax rate that is not higher than the highest combined rate of all local and state taxes; permit out-of-state vendors to remit sales taxes to one location; and, provide a statewide uniform provision for what is taxable.
A more robust Act was introduced by a bipartisan group of lawmakers on Sept. 13. It addresses retroactivity, obligations for small sellers, and state implementation dates.
Specifically, it would ban retroactive taxation as well as cookie nexus, and calls for standardized small business exemptions. For retailers with sales greater than $10 million, the Act would permit state collections to start Oct. 10, 2019; retailers with less than $10 million would be exempt from ecollections.
However, the provisions of the bill would be tied to the Multistate Tax Commission’s Streamlined Sales Tax centralization initiative, which creates some obstacles. And the Act would prevent states from imposing sales tax collection duties before Jan. 1, 2019.
State and local tax issues are very much up in the air, leaving great uncertainty for businesses. While these Congressional efforts could eventually simplify esales taxation across the country, there’s no guarantee of Congressional action and the interim will be messy. States that have rushed to fill the vacuum created by Congressional inaction have moved forward with their own interpretations of the law and may be averse to restrictions on their tax powers.
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