how to navigate the online sales tax legislative waters
TRANSCRIPT
How to Navigate the
Online Sales Tax Legislative Waters
AUDIO INFORMATION
Prepared for: Retail Online Integration Webinar
Presented by: Sylvia F. Dion, CPA
September 27, 2012
Presenting Today’s Webinar
Sylvia F. Dion, MPA, CPA
Owner, Sylvia F. Dion, CPA
State & Local Tax Consulting
www.sylviadioncpa.com
Creator, Author and Publisher
The State and Local Tax “Buzz” blog
www.thestateandlocaltaxbuzz.com
Internet Tax/E-Commerce Contributor
Sales-Use Tax Issues, Insights & Ideas blog
www.salestaxsupport.com
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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Today’s Topics
� Overview of Sales Tax nexus
� Internet Sales Tax “Myths and Misperceptions”
� Why internet retailers, like Amazon and Overstock, aren’t required to charge sales tax everywhere;Quill and “substantial nexus”
� The response – State “Amazon Laws”� What IS a State “Amazon Law”� But not all “Amazon Laws” are the same! � What on-line retailers really need to know
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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Today’s Topics, Continued
� A “plain English” explanation of the three Federal
Internet Sales Tax Proposals (with confusingly similar
names) and how they will impact online retailers
� The Main Street Fairness Act (S. 1452 / H.R. 2701)
� The Marketplace Equity Act (H.R. 3179)
� The Marketplace Fairness Act (S. 1832)
� A quick comparison of State “Amazon Laws” and the
Federal Internet Sales Tax proposals.
� Key points and final recap
How to Navigate the Online Sales Tax Legislative Waters , ROI Webinar, presented by Sylvia F. Dion, CPA
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30 Second Overview of Sales Tax Nexus
� 45 states plus D.C. impose a state sales tax on retail sales of
goods and on some services.
� Sales tax is a “trustee tax” – collected on behalf of the state or
local government. (retailers are collectors)
� An obvious physical presence (office, employees, storefront) in
a state will cause a retailer to have to collect sales tax.
� But wait – even activities that are not obvious (hiring
contractors, attending trade shows, contracting with marketing
affiliates) can cause a retailer to have to collect sales tax.
� These obvious and less than obvious activities create a
“connection” to a state, a “nexus”.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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It’s Time for a Polling Question
You’ve probably heard some of the myths and misperceptions
about sales made over the internet. Which have you heard?
1. Sales made over the internet are “tax-free”.
2. Sales tax isn’t charged on internet sales made because of the
Internet Tax Freedom Act – or some similar law.
3. At some point in the past, the federal government decided
internet retailers needed “special treatment”, “special
coddling”.
4. I’ve heard at least two of these myths, plus maybe even
more!!
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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Sales Tax Myths & Misperceptions
Misperception: “Isn’t there some type of federal internet law
that prevents internet sales from being
subject to sales tax?”
Fact: The Internet Tax Freedom Act (ITFA) of 1998 is not the
reason sales tax isn’t collected on many internet sales.
� Promotion and preservation of commercial, educational and information
potential of the Internet.
� Prohibits federal, state & local governments from imposing a tax on
internet access, discriminatory “internet only” taxes (e.g., an e-mail tax),
and multiple taxes on electronic commerce.
� Requires that taxable sales made over the internet are to be taxed at the
same rate as non-internet sales.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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Sales Tax Myths & Misperceptions
Misperception: “I’ll just buy it on the internetand save on sales tax!”
Fact: Internet purchases are often not “tax-free”!
� If an item is subject to tax in the customer’s state and the internet retailer does not charge sales tax, the customer is still required to pay the tax in the form of the use tax.
� The only customers who can really make “tax-free” internet purchases are those that live in one of the five states without a general state sales tax; Alaska, Delaware, Montana, New Hampshire, and Oregon.
� Approximately 26 states have a line on their state personal income tax
return where residents can report their annual use tax.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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Sales Tax Myths & Misperceptions
Misperception: “Internet retailers have a been given special
treatment, a special exemption from sales
tax.”
Fact: There is no special “exemption” or “treatment” that
internet retailers have been given.
� Internet retailers who do not have sales tax nexus in the state in which their
customers are located are not required to charge and collect sales tax.
� Internet retailers with no nexus are operating
within the letter of the law.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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“Quill” and Substantial Nexus
� U.S. Constitution prohibits states from undulyburdening interstate commerce.
� Transactions that cross state lines, like internetsales, qualify as interstate commerce.
� Two key clauses in the U.S. Constitution:� Due Process Clause – prohibits a state from taxing an out-of-state
company unless there’s at least some connection between the out-of-state company and the taxing state.
� Commerce Clause – requires the connection be more than trivial; requires that the out-of-state company have “substantial nexus” to the taxing state.
� Courts have had to interpret these clauses and define what is meant by “substantial nexus”.
How to Navigate the Online Sales Tax Legislative Waters , ROI Webinar, presented by Sylvia F. Dion, CPA
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“Quill” and Substantial Nexus
� 1992 landmark Supreme Court decision, Quill Corp. v. North
Dakota, 504 U.S. 298 (1992)
� Quill Corp., a Delaware based seller of office equipment and
supplies, made catalog sales to North Dakota customers.
� Quill did not charge its North Dakota customers sales tax.
� North Dakota argued that Quill’s activity in North Dakota
(distributing its catalog, licensing inventory control software,
allowing customers to make returns within 90 days) was
sufficient to create a sales tax collection responsibility.
� North Dakota Tax Commissioner assessed Quill the use tax.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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“Quill” and Substantial Nexus
� Case made its way to the U.S. Supreme Court, which held in favor of Quill.
� Two significant points Supreme Court made in Quill:� When a company participates in interstate commerce within the
borders of a state, that company must have “substantial nexus” (achieved through physical presence – office, employees, property) to the state in order for the state to require collection of sales tax for purchases by in-state customers.
� Congress has the power to change the law.
� Twenty years later, the Quill decision stands, and is the real reason internet retailers aren’t required to collect sales tax in states in which they do not have “nexus”.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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The Problem:
A Significant Percentage of Use Tax Goes Uncollected
� Use tax is largely not reported and not collected.
� National Conference of State Legislatures (NCSL) estimates that
requiring collection of sales tax on all on-line purchases would
generate approximately $24 billion in new annual revenue.
Top Five States
In Revenue Loss
Est. 2012 Uncollected
Sales Tax (in Billions)
California $4,159.70
Texas $1,777.10
New York $1,767.00
Florida $1,483.70
Illinois $1,058.80
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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State “Amazon Laws”
� The U.S. Supreme Court has refused to hear another case that would overturn Quill. (Refused to grant certiorari)
� The Quill decision has stood for the last 20 years.
� States prohibited from forcing out-of-state (“remote”) retailers to collect their state sales tax if the remote retailer does not have “substantial nexus” (i.e., physical presence).
� Several states have launched efforts to get around physical presence requirement of Quill by aggressively expanding what activities create a physical presence.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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State “Amazon Laws”
� The result –> states have enacted so called “Amazon Laws”
(nicknamed after their largest target)
� Many of these “Amazon Laws” focus on internet sellers who
contract with in-state marketing affiliates.
� Marketing affiliates are third-parties that post web ads or banners
that link to the on-line stores of internet sellers like Amazon.com and
receive a commission/fee for sales generated from links.
� In-state marketing affiliates create a physical presence for the out-of-
state seller that contracts with them.
� The out-of-state seller is presumed to have nexus.
� “Amazon Laws” are also referred to as “click-through”,
“web-linking” and “presumptive nexus” laws. nexus” laws.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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A Few More Points About State “Amazon Laws”
� Key point -> “Amazon Law” has come to mean any type of state nexus
expanding law intended to force out-of-state sellers to collect sales tax
or encourage in-state customers to pay use tax.
� Click-through, web-linking nexus - Marketing affiliates create an in-
state physical presence for the remote retailer, a nexus presumption.
� Affiliate nexus - Related companies operating in a state create nexus
for the out-of-state seller. The term “affiliate” in these laws has nothing
to do with marketing affiliates. Yes, it is confusing!
� Notification and reporting – Out-of-state sellers do not have nexus, but
the law imposes requirements on out-of-state sellers to encourage self-
reporting of use tax (or to force sellers to collect).
� Another key point -> They invite litigation on constitutional grounds.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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State “Amazon Laws” – Recent Big News
� Pennsylvania – September 1st deadline for remote retailers to
register and begin collecting Pennsylvania’s 6% sales tax (plus
additional 1% - 2% in certain local jurisdictions)
� On December 1, 2011, Pennsylvania DOR issued Sales and Use Tax
Bulletin 2011-01, Remote Seller Nexus
� Bulletin essentially reinforced the Pennsylvania DOR’s interpretation of
the existing law that activities such as engaging in-state marketing
affiliates or storing inventory in a Pennsylvania warehouse, create a sales
tax registration, collection, and remittance requirement.
� The remote seller registration and collection requirement is not based on
new enacting legislation. This is significant!
� Original effective date was 2/1/12. Pennsylvania DOR extended effective
date to 9/1/12 to give remote retailers more time to prepare.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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State “Amazon Laws” – Recent Big News
� California – arguable the biggest “Amazon Law” development!
� California enacted “Amazon Law” in June 2011 (AB X1 28), which
included both a click-through and affiliate nexus provision.
� What happened next?
� Amazon severed its ties with its tens of thousands of CA marketing affiliates.
� Refused to charge sales tax even after the law’s 7/1/11 effective date.
� Petitioned for a voter referendum - would’ve permanently repealed the law.
� California attempted (and failed) to pass urgency bill to stop referendum efforts.
� Amazon offered to negotiate with California (build warehouses and add jobs).
� California gave in temporarily. On 9/23/11, Governor Brown signed
AB 155, a compromise bill, which retroactively and temporarily
repealed California’s Amazon Law until at least 9/15/12.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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The “State of the States”
States that have passed some form of an “Amazon Law”
The “State of the States”
States that have passed some form of an “Amazon Law”
� Arkansas (2010)
� California (originally enacted 2011, temp repeal, effective 2012)
� Colorado (2010)
� Connecticut (2011)
� Georgia (2012)
� Illinois (2011)
� New York (2008)
� North Carolina (2009)
� Oklahoma (2010)
� Pennsylvania (2011 – per
bulletin, not legislation)
� Rhode Island (2009)
� South Dakota (2011)
� Texas (2011)
� Virginia (2011)
� Vermont (passed 2011, not effective until 15 states pass similar legislation)
State “Amazon Laws”
How to Navigate the Online Sales Tax Legislative Waters , ROI Webinar, presented by Sylvia F. Dion, CPA
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State “Amazon Laws” ���� Federal ProposalsStates are Hungry for Revenue
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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A National Solution:
The Federal Remote Seller Proposals
� The Main Street Fairness Act (“MSFA”) S. 1452/H.R. 2701
� Introduced on July 29, 2011.
� Senate version, S. 1452, introduced by Senator Richard “Dick” Durbin (D-IL).
� House version, H.R. 2701, introduced by Representative John Conyers (D-MI).
� S. 1452 and H.R. 2701 are identical and are jointly referred to as The Main Street Fairness Act.
� Full-member Streamlined Sales & Use Tax Agreement (SSUTA) states would have authority to require remote sellers to collect sales tax.
� Democratic support only, not a bi-partisan effort.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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A National Solution:
Federal Remote Seller Proposals
�The Marketplace Equity Act (“MEA”), H.R. 3179� Introduced on October 12, 2011.
� Introduced by Representatives Jackie Speier (D-CA) and Steve Womack (R-AK).
� No connection to the SSUTA.
� Has its own set of simplification requirements that states must meet in order to have authority to require remote sellers to collect sales tax.
� SSUTA states may need to take extra steps to comply with MEA’s simplification requirements.
� Bi-partisan support.
� July 24, 2012 Judiciary Committee Hearing.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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A National Solution:
Federal Remote Seller Proposals
�The Marketplace Fairness Act (“MFA”), S. 1832� Introduced on November 9, 2011.
� Introduced by Senators Mike Enzi (R-WY), Lamar Alexander (R-TN), and Dick Durbin (D-IL).
� Same Dick Durbin that introduced the S. 1452.
� Offers two ways states can obtain authority to require remote sellers to collect sales tax:
� States that are full-member SSUTA states qualify for “collection authority” (in same was as under Main Street Fairness Act).
� States can implement the MFA’s alternative set of simplification requirements.
� Bi-partisan support.
� August 1, 2012 Senate Commerce Committee hearing.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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Federal Remote Seller Proposals
Streamlined Sales & Use Tax
� Two proposals, the MSFA (S. 1452/H.R. 2701), and the MFA (S.
1832), incorporate provisions of SSUTA.
� What is the SSUTA?
� Comprehensive multi-state agreement originally designed
through cooperative effort of 44 states and the District of
Columbia, local governments and the business community to
simplify sales & use tax collection and administration.
� This simplification effort – a response the Quill decision – known
as the Streamlined Sales Tax Project (SSTP).
� Organization created to oversee SST Project and administer the
SSUTA – the Streamlined Sales Tax Governing Board (SSTGB).
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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Federal Remote Seller Proposals
Streamlined Sales & Use Tax
� A state must be a SST full-member state to be granted collection authority under the MSFA and under one of the two alternatives under the MFA. Associate member states are not entitled to the same collection authority.
� By October 1, 2012, there will be 22 full member states:� Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Michigan,
Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Oklahoma, Rhode Island, South Dakota, Vermont, Utah*, Washington, West Virginia, Wisconsin, and Wyoming.
� Ohio and Tennessee are associate members states.
** Utah is an associate member as of today’s date, 9/27/12. Utah will become a full-member State on 10/1/12.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion
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Federal Remote Seller Proposals
Collection Authority
� What does “collection authority” mean?
� States that fulfill the various requirements under whichever of the
federal proposals is enacted, will have the power - the authority – to
require certain out-of-state sellers to charge and collect sales tax on
sales to customers in the state with the collection authority.
� Nexus would no longer be required!
� States with collection authority will be able to require an out-of-state
seller (also referred to as a remote seller) to collect that state’s sales tax
even if the remote seller does not have nexus to the state.
� States have to take action to obtain this authority.
� Key point -> more focus on whether state has fulfilled the federal
law’s requirements; less focus on a taxpayer’s nexus profile.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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Federal Remote Seller Proposals
State Requirements
� Under each of the three federal proposals, states will need to take action. State have to simplify their sales tax collection and administration systems.
� The next few slides detail what states need to do under the MEAand the MSFA.
� Why is knowing about these requirements important to internet retailers?
� If a retailer is selling into a state that has simplified its sales tax collection and administration system, and met the other requirements in whichever one of the three proposals passes (if any of them pass), then that state will be able to require sellers to collect sales tax on sales to customers in their state.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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Federal Remote Seller Proposals
State Requirements - MSFA (S. 1452/H.R. 2701)
� Under the MSFA (S. 1452/H.R. 2701), states which are SST full-members will have collection authority.
� States that wish to obtain collection authority under the MSFAmust petition for and become SST full-members.
� The Streamlined Sales and Use Tax Agreement is (SSUTA) is the operative agreement for establishing simplification requirements.
� Remote sellers that meet the SSUTA’s small-seller exception, are exempt from collecting sales tax. (discussed in future slide)
� The MSFA, the first remote seller proposal, is essentially dead; efforts to pass federal remote seller legislation are focused on passing either the MEA (H.R. 3179) or the MFA (S. 1832).
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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Federal Remote Seller Proposals
State Requirements – MEA (H.R. 3179)
� Under the MEA (H.R. 3179), state must implement a simplified
system for the administration of remote seller’s sales and use tax
(SUT) collection responsibilities which would meet the following
minimum requirements:
� Provide a remote seller tax return and designate a single revenue
authority for remote seller return filings.
� Remote sellers can’t be required to submit any other SUT return or file
returns more frequently than returns required by non-remote sellers
� Local jurisdictions can’t impose a local SUT filing requirement.
� Taxable products/services and exemption must be identically defined
throughout the state. Exemptions can’t include products/services that
aren’t exempt when sold by non-remote sellers.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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Federal Remote Seller Proposals
State Requirements – MEA (H.R. 3179), Cont.
� Must require remote sellers to collect sales and use tax under one
of the three following rate structures:
� A single state-wide blended rate,
� The maximum state rate, or
� The applicable destination rate.
� States choosing destination rate option required to make adequate
software available to remote sellers (to ease the burden of
collecting at multiple rates), and relieve remote sellers for any tax,
interest and penalty for collecting an incorrect sales or use tax
amount that was due to relying on information provided by the
state.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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Federal Remote Seller Proposals
State Requirements – MEA (H.R. 3179), Cont.
� State must define/establish a “Small Seller Exception” (future slide)
� State must also publish public notice with the title of/references to, the
enacted state remote seller collection legislation; the remote seller tax
collection criteria; the rate(s) that non-exempted remote sellers must
charge on in-state taxable sales; the date remote sellers required to begin
collecting tax; and reference to compliance information and the remote
seller sales and use tax form.
� Once the Act’s simplification and public notice requirements have been met,
a state may exercise its remote seller collection and remittance authority
beginning on the first day of the calendar quarter that occurs at least six
months after the date that the state published the required public notice.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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Federal Remote Seller Proposals
State Requirements – MFA (S. 1832)
� MFA (S. 1832) offers two ways states can obtain authority to
require remote sellers to collect sales tax:
� States can qualify for collection authority by meeting requirement to
become SST full-member states (same as in MSFA)
� States can qualify for collection authority by fulfilling all of the MFA’s
alternative set of simplification requirements
� Because states have two options, some believe the MFA has the
best chance of passing of the three proposals.
� Some of the largest/most significant sales tax states, e.g.,
California, Texas, Florida, have been reluctant to join the SST. The
MFA offers these states a viable option.
,How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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Federal Remote Seller Proposals
State Requirements – MFA (S. 1832), Cont.
� Under the MFA’s alternative simplification requirements, states
must provide all of the following:
� a single state-level agency to administer all sales and use tax (SUT)
laws, including the collection/administration of all state and
applicable local sales and use taxes;
� a single audit for all state and local taxing jurisdictions;
� a single SUT return for use by remote sellers and by single and
consolidated providers;
� a uniform SUT base among the state and its local taxing
jurisdictions;
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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Federal Remote Seller Proposals
State Requirements – MFA (S. 1832), Cont.
MFA’s simplification requirements, continued:
� adequate software and services to remote sellers and single and
consolidated providers that identifies the applicable destination
rate, including the state and local sales tax rate, to be applied on
sales sourced to the state;
� certification procedures for both single and consolidated providers
to make software and services available to remote sellers, which
include an agreement to hold providers harmless for any errors or
omissions as a result of relying on state provided information;
� 30 days’ notice to remote sellers and single and consolidated
providers of local tax rate changes
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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Federal Remote Seller Proposals
State Requirements – MFA (S. 1832), Cont.
MFA’s simplification requirements, continued:
� requirement that remote sellers and single and consolidated
providers to collect at applicable destination rate (sum of state rate
and local destination jurisdiction rate);
� hold remote sellers using a single or consolidated provider harmless
for any errors and omissions by that provider; and relieve remote
sellers from liability (including penalties and interest) for collection of
incorrect amount of sales or use tax if collection of the improper
amount is the result of relying on information provided by the state.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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Federal Remote Seller Proposals
State Requirements – MFA (S. 1832), Cont.
� States that qualify for remote seller collection authority under
MFA’s alternative simplification requirements entitled to
collection authority “no earlier than the first day of the
calendar quarter that is at least 6 months after the date the
State enacts legislation to implement the requirements.”
� English translation -> a state would first need to pass
legislation giving the state authority to implement the MFA’s
alternative simplification requirements and then, would have a
minimum of 6 months to put all of the requirements and
provisions in place.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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It’s Time for Another Polling Question
All three proposals have a small-seller exception. Before continuing, what’s
your opinion on what the small seller exception should be?
1. Remote sellers with gross revenues of $500K or less should be exempt from
collecting sales tax in states with collection authority.
2. Remote sellers with gross revenues of $1M or less should be exempt from
collecting sales tax in states with collection authority.
3. A $500K or even a $1M small seller exception is too low – the revenue
threshold that sellers must meet before being required to collect sales tax
should be much higher!!
4. All remote sellers, no matter what their revenues, should be required to
collect in states with collection authority – heck, all brick-and-mortar
retailers have to collect sales tax even if their revenues are small.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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Federal Remote Seller Proposals
Small Seller Exceptions
� The MSFA (S. 1452/H.R. 2701) and the MFA (S. 1832) (under one of its two
alternatives) would give SST full-member states collection authority.
� SST full-member states would use the SSUTA’s small-seller definition.
� A remote seller with total annual U.S. gross sales of $500,000 or less is
exempt from collecting sales tax in a SST full-member state.
� Based on the most recent 12 month period from 7/1 to 6/30.
� When determining whether $500,000 gross sales threshold has been
exceeded, the SSUTA requires that gross sales amount includes sales of
certain related businesses.
� SST Governing Board has authority to increase or decrease the dollar
volume that small-sellers must not exceed.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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Federal Remote Seller Proposals
Small Seller Exceptions
� Under the MEA (H.R. 3179), remote sellers with total annual U.S. gross
receipts of $1,000,000 or less would be exempt from collecting sales tax in
states meeting the MEA’s simplification and other requirements.
� Gross receipts are based on the preceding calendar year.
� Remote seller could also be exempt from a particular state’s requirements
if the seller’s annual sales to that particular state do not exceed $100,000.
(Even if the seller’s total U.S. gross receipts are more than $1,000,000)
� MEA also gives states the option of increasing the dollar threshold.
� For example, as the $1,000,000 (gross receipts total) is not a specific limit, a
state could say that a remote seller is exempt from collecting its sales tax even if
a seller’s total U.S. gross receipts exceed $1,000,000. (The state has the ability to
determine the higher threshold amount. States can’t use a lesser amount.)
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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Federal Remote Seller Proposals
Small Seller Exceptions
� The MFA (S. 1832), offers states two alternatives for obtaining collection
authority. States that qualify as SST full-member states use the small-seller
exception of the SSUTA (explained in prior slide).
� States that qualify for collection authority by meeting the MFA’s alternative
simplification requirements, use the proposal’s alternative small-seller
exception which exempts remote sellers with total annual U.S. gross
receipts of $500,000 or less.
� Gross receipts are based on the preceding calendar year.
� Like the small seller exception under the SSUTA, the MFA’s alternative
definition requires remote sellers to include the sales of certain related
businesses, such as subsidiaries that are all owned by the same parent
company, when determining if they meet the small seller exception.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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Federal Remote Seller Proposals
Comparison of Small Seller Exception
Main Street Fairness Marketplace Equity Marketplace Fairness
Based on small-seller
definition of the SSUTA
MEA has its own definition of
small seller
Based on SSUTA definition or
alternative definition
Remote seller exempt from
collecting sales tax in SST state
if seller’s total annual U.S.
gross sales within the prior 12
month period from 6/30 to
7/1, were $500K or less.
Remote seller exempt from
collecting sales tax in MEA
states if seller’s total annual
U.S. gross receipts within the
preceding calendar are $1M or
less.
SSUTA definition of small seller
applies in SST states.
Alternative is similarly worded
– exempt if total annual U.S.
gross receipts within the
preceding calendar year $500K
or less.
Seller may also be exempt in a
state if sales to that state not
more than $100K.
SST Governing Board can
increase or decrease the
threshold
States have option of enacting
a higher (but not a lower)
dollar threshold.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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Federal Remote Seller Proposals
Key Points
� The MSFA (S. 1452/H.R. 2701) – the first proposal introduced over
year ago is permanently stalled – the MSFA is not a serious contender.
� Both the MEA (H.R. 3179), the second proposal introduced in
October 2011, and the MFA (S. 1832), the third proposal introduced
in November 2011, are contenders to pass.
� Some believe the MFA (S. 1832), has the best chance because it
offers states two alternatives for obtaining collecting authority.
� Many of the most significant sales tax states, e.g., California, Texas and Florida have
been reluctant to join the SST.
� Others believe that the MEA (H.R. 3179) is the preferred proposal
because the MFA (S. 1832) gives power to the SST Governing Board, a
non-elected organization, to set rules/make de-facto laws.
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Federal Remote Seller Proposals
Key Points
� The federal remote seller proposals offer a “National Solution”, not an across
the board national sales tax (as media stories have reported).
� States have to take action to obtain “collection authority” - will not have this
authority until they fulfill the requirements laid out in the federal remote
seller proposal that passes. (if any of them passes)
� If the MFA (S. 1832) passes, states that are already SST full-member states
will be able to require remote sellers (except for small-sellers) to begin
collecting their state’s sales tax fairly quickly as these states have already
simplified in accordance with the SSUTA.
� Under the three federal proposals, nexus is not required for a state to
enforce its collection requirement on a remote seller!!
� Will become more important to focus on states where customers are located
and what those states are doing to comply with the federal law.
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One Last Polling Question
Do you believe a federal remote seller proposal, such as the
three we’ve discussed today, will be enacted, and if so, in
what year?
1. 2012 : I really think one of the three proposals (the
MSFA, the MEA or the MFA) will pass this year!
2. 2013 : It may not happen this year – but the
momentum to get this type of legislation is high. It
will happen next year.
3. 2014 or later: It will happen..…eventually!
4. Never! It will never, ever happen!
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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Comparing Amazon Laws to the
Federal Remote Seller Proposals
� “Amazon Laws” require that there be nexus to the “taxing state” even if nexus is a created through a mere web-link posted on a marketing affiliate’s web-site. Still a nexus requirement!
� The federal remote seller proposals do not require nexus to the “taxing state”. As long as a state meets and fulfills the federal law’s requirements, the state can require remote sellers (that do not meet the definition of a small seller) to collect their state’s sales tax.
� “Amazon Laws” will not cease to exist! A state may prefer to enact their own law instead of complying with the federal law.
� Not only will companies need to continue to focus on their nexus profile, they will also need to focus on what actions various states are taking to comply with the federal law.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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Recap: Key Points to Remember
� The rules on what activity creates sales tax nexus can vary from state to
state.
� Many less than obvious activities may create sales nexus even without
an “Amazon Law” in place.
� States are becoming more aggressive in defining “physical presence”
and enacting laws that, at a minimum, stretch the nexus envelope, and
at the extreme, are unconstitutional.
� There are many “internet sales tax” misperceptions; many of these are
perpetuated by the media.
� States are tired of waiting for Congress to act. Unless a “national
solution” is enacted, states will continue to propose legislation that will
require more remote retailers to collect their sales tax.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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Recap: Key Points to Remember
� It is highly unlikely that the MSFA will pass. But there is a
possibility that the MEA or the MFA could pass.
� If none of the current proposals (MSFA, MEA or MFA) are passed
by the 112th Congress (i.e., by the end of 2012), if is highly likely
that similar legislation will be introduced by the next Congress.
� State “Amazon Laws” and the federal proposals will impact many
“smaller” internet sellers.
� If your company is making sales over the internet, it is extremely
important to keep up-to-date on “internet sales tax”
developments.
� Brick-and-mortar sellers that make sales over the internet are
also impacted by these developments.
How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA
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Final Questions Please
Interested in More Information?
� Any final questions? Would love to hear them now!
� Want more information on “Internet Sales Tax” Developments?
Visit the following blogs where I write about State “Amazon Law” and
Federal Internet Sales Tax developments.
� The State and Local Tax “Buzz” blog (my tax blog on state tax issues and
developments):
http://www.thestateandlocaltaxbuzz.com/
� Internet Tax / E-Commerce blog section of SalesTaxSupport’s Sales-Use
Tax Issues, Insights & Ideas blog:
http://www.salestaxsupport.com/blogs/sales-use-tax/category/internet-
tax-ecommerce/
� Also visit Avalara’s blog for more internet sales tax coverage:
� www.blog.avalara.com
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Have more questions? Want more information?
Contact me at:
978-846-1641 (direct) or
Or visit my company website at:
www.sylviadioncpa.com
Other contact info:
Twitter @SylviaDionCPA
LinkedIn: www.linkedin.com/in/sylviadioncpa
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