New Bill May Change the Sales Tax System

If your clients include retailers, pending federal legislation allowing states to tax Internet sales could mean big changes in the way they process and account for their sales and use taxes.

In July, the Marketplace and Internet Tax Fairness Act was introduced in the Senate. The bill combines the earlier Marketplace Fairness Act and Internet Tax Freedom Act.

Here's a snapshot of SB 2609:

  • States can require a remote seller to collect sales and use taxes only if the seller's gross annual receipts in total U.S. remote sales for the prior year are more than $1 million.
  • "States" also include the District of Columbia, Commonwealth of Puerto Rico, Guam, American Samoa, U.S. Virgin Islands, Commonwealth of the Northern Mariana Islands, any other U.S. territory or possession, and tribal organizations.
  • "Remote" means sales into a state based on sourcing rules.
  • "Sourcing" refers to where the product or service is received by the buyer. If an address is unknown and a billing address is unavailable, the remote sale is sourced to the seller's address.
  • With what are called the minimum simplification requirements, states will provide a single entity that's responsible for administering state and local sales and use taxes for remote sales, processing returns and audits; a single audit of remote sellers for all taxing jurisdictions; and a single sales and use tax return to be used by remote sellers.
  • States can't require more of remote sellers than they do of non-remote sellers.
  • States must provide free software for remote sellers to calculate sales and use taxes, and file returns.
  • Software service providers must be state certified.
  • The bill doesn't encourage states to impose new taxes.
  • There's no effect on in-state sales.
  • Amends the Internet Tax Freedom Act to extend the ban on Internet access taxes to Nov. 1, 2024.

"The shopping center industry would like to thank Senators Mike Enzi, R-Wyo.; Dick Durbin, D-Ill.; Lamar Alexander, R-Tenn.; Heidi Heitkamp, D-North Dakota; Susan Collins, R-Maine and Mark Pryor, D-Ark. for their steadfast leadership on this issue and for working tirelessly to move long-overdue sales tax fairness legislation forward," said Michael P. Kercheval, president and chief executive officer of the International Council of Shopping Centers, in a prepared statement. "This bill signals that leveling the playing field for all retailers is a top priority for Congress this year."

Traditional brick-and-mortar retailers have long complained that web-based companies had an unfair advantage in that sales and use taxes often weren't collected.

Jonathan Barsade, whose company, Philadelphia-based Exactor Inc., offers cloud-based solutions for sales tax compliance, says it's time that Internet commerce got the respect it deserves.

"E-commerce has reached maturity and there's no reason we should treat it as some sort of start-up that needs additional incentives," says Barsade, an attorney who specializes in taxation and technology.

And for CPAs and tax attorneys, the legislation would expand their scope of business and be a business aid, he says. "It will insert a level of certainty and sanity to the environment."

You may like these other stories...

Boehner addresses GOP priorities ahead of midterm electionsHouse Speaker John Boehner (R-OH) on Thursday delivered what amounted to closing arguments ahead of the November elections, laying out a list of Republican...
As anyone who's ever been through a divorce can attest, the pain of parting with your spouse isn't just emotional—the fallout from divorce can wreak financial havoc as well long after the dust in the courtroom...
Former DOJ Tax Division head Kathryn Keneally joining DLA Piper in New YorkGlobal law firm DLA Piper announced on Thursday that Kathryn Keneally, the former head of the US Justice Department Tax Division, is joining the firm...

Already a member? log in here.

Upcoming CPE Webinars

Sep 24
In this jam-packed presentation Excel expert David Ringstrom, CPA will give you a crash-course in creating spreadsheet-based dashboards. A dashboard condenses large amounts of data into a compact space, yet enables the end user to easily drill down into details when warranted.
Sep 30
This webcast will include discussions of important issues in SSARS No. 19 and the current status of proposed changes by the Accounting and Review Services Committee in these statements.
Oct 21
Kristen Rampe will share how to speak and write more effectively by understanding your own and your audience's communication style.
Oct 23
Amber Setter will show the value of leadership assessments as tools for individual and organizational leadership development initiatives.