Marketplace Fairness Act of 2013
There have been many articles recently in the news regarding the U.S. Senate’s proposed legislation, the Marketplace Fairness Act of 2013 (S. 743). The U.S. Senate passed this legislation on May 6, 2013. The bill is now before the U.S. House of Representatives, which is said to be less receptive to the bill than the Senate. It is unlikely that the bill will be enacted, however, one should be aware of the details of the bill and its potential effect on taxpayers and the economy.
The legislation will allow certain states to impose sales and use taxes on all Internet sales. Any state that is a member of the Streamlined Sales and Use Tax Agreement (“SSUTA”) will be authorized to require out-of-state sellers to collect tax on sales into that state. If the state opts to create such a requirement, businesses that fall within the “small seller exception” will not be required to collect such tax. A “small seller” is an out-of-state seller that has less than $1,000,000 of annual gross receipts in total “remote sales” in the United States in the preceding calendar year. “Remote sales” do not include sales into states where the seller has nexus.
States which are not members of the SSUTA will not be authorized to require such collection of tax. However, this legislation provides a mechanism for a non member state to have such authority. Specifically, if a non member state establishes certain procedures which include simplifying the collection and remittance of sales and use taxes in its state, it will be authorized to require remote sellers to collect the tax. These procedures are very similar to the requirements necessary to become a member of the SSUTA and include free software to ease remote sellers’ administrative burden.
As of October 1, 2012, about half of the states are members or associate members of the SSUTA: Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Washington, West Virginia, Wisconsin and Wyoming.
The Missouri Legislature has recently passed a bill requiring the Missouri Department of Revenue to enter into the SSUTA. If the Governor signs the bill, the Department will begin the process of becoming an SSUTA member. Subsequently, if the Marketplace Fairness Act becomes law, Missouri would be one of the SSUTA states that would be authorized to require out-of-state sellers to collect tax. The state would likely opt to do so since participation will greatly enhance Missouri’s budget.
Pam Huelsman, is a State and Local Tax (SALT) Manager in the Tax Services practice at Brown Smith Wallace. Click here to contact Pam or learn more about SALT services.