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."