MARKETPLACE FAIRNESS ACT: IMPACT ON NON-INTERNET REMOTE RETAILERS?
Everywhere you look, people, the media, etc. are talking about the Marketplace Fairness Act (day after day after day). Is it fair? Will it pass the House? How will it impact business? Will it change customers buying habits? Etc.?
Regardless of what opinion you or I may have, we must prepare for the potential enactment.
I feel like there has been a great deal of discussion about the bill, but who has actually read the bill????
Here is a link to a copy of the bill if you are so inclined - MARKETPLACE FAIRNESS ACT.
COLLECTION OBLIGATION WITHOUT TAXABLE PRESENCE (NEXUS)
If you read the bill, you will begin to understand that the legislation is creating a tax collection obligation on businesses without nexus (or a taxable presence in a state). The Act clearly states that it does not create any nexus between a person and a state or locality. Nexus has historically been the basis for when a business had the obligation or requirement to begin to collect sales tax in a state. Therefore, the Act does not create nexus for an out-of-state company. The Act only creates a collection obligation.
IMPACT ON NON-INTERNET REMOTE RETAILERS
"Remote Sale" is defined as a sale into a State in which the seller would not legally be required to pay, collect or remit State or local sales and use taxes unless provided by this Act."
"Remote Seller" is defined as a person that makes remote sales in the State.
Hence, it appears that this Act would apply to any business (not just Internet Retailers) that makes sales into a state in which it does not have nexus. Therefore, manufacturers or other non-Internet retailers who sell directly to retail customers who do not have sales representatives or any other physical connection with a state may (under this Act) be required to collect sales tax on its remote sales.
Brick and mortar retail stores who sale to customers over the phone, or ship products to customers in other states may be required to collect sales tax in those states.
Have you been focused on Internet retailers without thinking about how it will impact your business?
Does your company have non-Internet remote retail sales in states where you don't have nexus?
For past posts on the Act, go to What is Fair?
Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State Tax Notes entitled, "The SALT Effect." For more info, visit his website: www.leveragestateandlocaltax.com
You can reach Brian at firstname.lastname@example.org.
Because state and local taxes are deceptively simple and endlessly complicated.