A new online sales bill introduced last week would include an exemption for small businesses that generate less than $10 million in annual U.S. e-commerce sales. Based on Internet Retailer research, the bill would require the 1,629 retailers that generated e-commerce sales of at least $10 million last year to collect sales tax on remote sales while allowing smaller merchants to avoid doing so.
Similar to the bill Rep. Bob Gibbs (R-Ohio) introduced earlier this month, this bill—called Online Sales Simplicity and Small Business Relief Act—is a response to the U.S. Supreme Court’s decision in Wayfair v. South Dakota, which allows states to require out-of-state merchants to collect and remit local sales tax on goods sold to their residents.
The new bipartisan bill, sponsored by Reps. Jim Sensenbrenner (R-Wisc.), Anna Eshoo (D-Calif.), Jeff Duncan (R-S.C.) and Zoe Lofgren (D-Calif.), would prohibit states from forcing out-of-state retailers to remit sales taxes from sales prior to June 21, the date of the Wayfair decision. It would prevent states from imposing sales tax collection duties until Jan. 10, 2019 and, most notably, it would carve out a $10 million exemption for small business sellers until the states produce a Congress-approved bill that, according to the bill, would simplify sales tax collection to the point where no small business exemption would be necessary.
“This bipartisan legislation reins in the taxation free-for-all created by the Supreme Court’s ruling in Wayfair,” Sensenbrenner says in a statement. “Online sellers need clarity and stability in the sales tax arena. Our bill will protect small businesses and internet entrepreneurs from excessive regulatory burdens.”
Although, this is the third online sales-tax bill introduced since the Wayfair decision, and few expect Congress to act.
“These issues have been around for some time and Congress has never acted,” says Rachelle Bernstein, vice president and tax counsel at the National Retail Federation. “Do you think they have the time or the inclination to act now? Frankly, I’m skeptical.”
Similarly, Overstock.com Inc. board member Jonathan Johnson III believes that, “Congress will do what it always does, which is nothing,” he says. That being said, he worries that the $10 million exemption doesn’t make sense. “If you’re making $9 million, you can afford to get sales tax software,” he says.
Overstock is No. 32 in the Internet Retailer 2018 Top 1000.