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 2

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

Today’s Topics 3


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

Today’s Topics, Continued 4








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

30 Second Overview of Sales Tax Nexus 5


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

It’s Time for a Polling Question 6

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

Sales Tax Myths & Misperceptions 7

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

Sales Tax Myths & Misperceptions 8

Misperception: “I’ll just buy it on the internet and 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

Sales Tax Myths & Misperceptions 9

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

“Quill” and Substantial Nexus 10


U.S. Constitution prohibits states from unduly

burdening interstate commerce.


Transactions that cross state lines, like internet

sales, 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-ofstate 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

“Quill” and Substantial Nexus 11


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

“Quill” and Substantial Nexus 12


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

The Problem: A Significant Percentage of Use Tax Goes Uncollected 13

 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

State “Amazon Laws” 14


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

State “Amazon Laws” 15


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-ofstate 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

A Few More Points About State “Amazon Laws” 16


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 instate 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 selfreporting 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

State “Amazon Laws” – Recent Big News 17


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

State “Amazon Laws” – Recent Big News 18


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

State “Amazon Laws” 19

The “State of the States” States that have passed some form of an “Amazon Law”
Arkansas (2010)


Oklahoma (2010)


California (originally enacted 2011, temp repeal, effective 2012)


Pennsylvania (2011 – per


Colorado (2010)


Rhode Island (2009)


Connecticut (2011)


South Dakota (2011)


Georgia (2012)


Texas (2011)


Illinois (2011)


Virginia (2011)


New York (2008)


Vermont (passed 2011, not


North Carolina (2009)

bulletin, not legislation)

effective until 15 states pass similar legislation)

How to Navigate the Online Sales Tax Legislative Waters , ROI Webinar, presented by Sylvia F. Dion, CPA

State “Amazon Laws”  Federal Proposals States are Hungry for Revenue 20

How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA

A National Solution: The Federal Remote Seller Proposals 21


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

A National Solution: Federal Remote Seller Proposals 22


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

A National Solution: Federal Remote Seller Proposals 23


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

Federal Remote Seller Proposals Streamlined Sales & Use Tax 24


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

Federal Remote Seller Proposals Streamlined Sales & Use Tax 25


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

Federal Remote Seller Proposals Collection Authority 26


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

Federal Remote Seller Proposals State Requirements 27


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 MEA and 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

Federal Remote Seller Proposals State Requirements - MSFA (S. 1452/H.R. 2701) 28


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 MSFA

must 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

Federal Remote Seller Proposals State Requirements – MEA (H.R. 3179) 29


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

Federal Remote Seller Proposals State Requirements – MEA (H.R. 3179), Cont. 30

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

Federal Remote Seller Proposals State Requirements – MEA (H.R. 3179), Cont. 31 

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

Federal Remote Seller Proposals State Requirements – MFA (S. 1832) 32


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

Federal Remote Seller Proposals State Requirements – MFA (S. 1832), Cont. 33


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

Federal Remote Seller Proposals State Requirements – MFA (S. 1832), Cont. 34

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

Federal Remote Seller Proposals State Requirements – MFA (S. 1832), Cont. 35

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

Federal Remote Seller Proposals State Requirements – MFA (S. 1832), Cont. 36




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

It’s Time for Another Polling Question 37

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

Federal Remote Seller Proposals Small Seller Exceptions 38


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

Federal Remote Seller Proposals Small Seller Exceptions 39


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

Federal Remote Seller Proposals Small Seller Exceptions 40


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

Federal Remote Seller Proposals Comparison of Small Seller Exception 41

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

Federal Remote Seller Proposals Key Points 42


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. How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA

Federal Remote Seller Proposals Key Points 43


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. How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA

One Last Polling Question 44

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

Comparing Amazon Laws to the Federal Remote Seller Proposals 45


“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

Recap: Key Points to Remember 46


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

Recap: Key Points to Remember 47


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

Final Questions Please Interested in More Information? 48


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/internettax-ecommerce/


Also visit Avalara’s blog for more internet sales tax coverage: 

www.blog.avalara.com

How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA

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Have more questions? Want more information? Contact me at: 978-846-1641 (direct) or [email protected] Or visit my company website at: www.sylviadioncpa.com Other contact info: Twitter @SylviaDionCPA LinkedIn: www.linkedin.com/in/sylviadioncpa How to Navigate the Online Sales Tax Legislative Waters, ROI Webinar, presented by Sylvia F. Dion, CPA