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By: Christian M. Wade of the Gloucester Daily Times

BOSTON — Lawmakers in Washington are weighing several plans that may complicate the efforts of Massachusetts and other states to collect sales taxes from online retailers.

A bill filed by U.S. Rep. Jim Sensenbrenner, R-Wisconsin, would prohibit states from collecting sales taxes from online sellers with less than $10 million in annual sales. States that begin collecting sales tax before Jan. 1, 2019, would have to refund online businesses that paid the taxes.

Congressman Bob Gibbs, R-Ohio, has filed a bill to prohibit states from collecting online sales taxes for at least a year, to give businesses time to comply.

Both proposals come on the heels of a U.S. Supreme Court ruling this summer that allows states to collect sales taxes from out-of-state online retailers.

The 5-4 decision in South Dakota v. Wayfair was heralded as a victory for states that have been losing billions of dollars annually in online sales taxes, as well as brick-and-mortar retailers losing customers to online sellers. Justices weighed arguments from three-dozen states pressing for a ruling that would allow them to collect taxes on purchases involving out-of-state merchants.

Still another proposal, filed by Sen. Jon Tester, D-Montana, would undo the Wayfair decision and prevent states from collecting from sellers with no physical presence there.

NetChoice — a trade group representing Overstock.com, eBay, PayPal and other online retailers — says the proposals on Capitol Hill are aimed at Massachusetts and other states that are trying to squeeze more money out of retailers than the court’s decision allows for, by collecting taxes on purchases made prior to the ruling.

“The unreasonable approach that’s being taken by Massachusetts is exactly why we need congressional action,” said Steve DelBianco, the group’s executive director.

“We need to stop the madness,” he said. “Congress needs to prevent retroactive liability for companies by the states, we need a moratorium on new demands so that retailers have time to comply, and we need incentives for states to simplify their tax regimes and in the meantime protect small businesses.”

‘Wrongheaded’

Retail groups that have been prodding the state for years to tax online sales decried the push in Congress to blunt the impact of the court’s ruling.

“It’s wrongheaded and it’s being driven by online companies like eBay that want to delay this ruling as long as possible,” said Jon Hurst, president of the Massachusetts Association of Retailers, which opposes the legislation. “This has been a 20-year battle — it’s time to put this behind us and get everyone on the same playing field.”

Hurst’s group has signed onto a letter to congressional leaders from a coalition that includes the National Retail Federation and National Association of Realtors, calling on them to reject the proposals.

“For Congress to insert themselves post-ruling only creates additional uncertainty and further complicates the implementation process, while undermining the level playing field created by the Wayfair decision,” the letter reads.

Last year, Massachusetts issued a directive ordering out-of-state companies that meet certain criteria — 100 or more online sales involving Bay State consumers, or that are worth at least $500,000 per year — to collect the state’s 6.25 percent sales tax. At least 250 companies have agreed to do so.

At the time, the state Department of Revenue relied on their argument that ‘“cookies” stored on a computer or smartphone apps by websites effectively create a retailer’s physical presence in the state. But state officials say the high court’s ruling eliminated as “unsound and incorrect” the physical presence requirement.

On Monday, the Department of Revenue issued a notice clarifying that it intends to collect sales taxes from online retailers who meet the criteria for the nine-month period prior to the court’s ruling.

“A significant number of vendors complied with the regulation as of the Oct. 1, 2017, effective date, or shortly thereafter, and continue to collect and remit sales or use tax,” Revenue Commissioner Christopher Harding wrote in the advisory to taxpayers.

Legal challenge

Meanwhile, the state is still embroiled in a legal challenge by a Virginia-based internet retailer over efforts to collect online sales taxes. Crutchfield Corp., which sells electronics, sued last year claiming the state’s policy violates interstate commerce laws.

The company’s attorneys have said in court filings the rule “imposes an obligation on certain internet vendors to collect and remit sales or use taxes on electronic commerce” that are not applied to other businesses. Neither side would comment on the litigation.

In Massachusetts, revenue officials say about $200 million a year is lost to online sales — a figure that has swelled as consumers do more business in cyberspace.

Retailers near the border with New Hampshire — one of five states that don’t charge sales taxes — face a double blow from tax-free competitors.

Massachusetts has a so-called “use tax” that requires residents to pay sales taxes on purchases made out of state or online. The state asks taxpayers to self-report online spending, but analysts say enforcement is almost nonexistent.

“If Massachusetts is so desperate for that tax revenue, let them pursue their own citizens to pay the use tax they already owe on those purchases,” DelBianco said.

By: Liz Farmer of Governing

A decade after the worst financial crisis in modern American history, two separate analyses of government finances have found that most states are better prepared to weather the next recession.

S&P Global Ratings and Moody’s Analytics have concluded that a majority of states have either adequate funds or almost enough to make it through the next recession without the massive layoffs and draconian cuts governments had to resort to following the 2008 global financial crisis.

But both firms also discovered a disturbing trend: A subset of states have continued to struggle and remain worse-off than they were a decade ago. “All else equal, this is going to result in a faster recovery [compared with 2008] among the states that are most prepared,” says Dan White, a director at Moody’s Analytics. “What’s troubling, though, is we’re seeing an increasing gap between the have and have-nots.”

S&P and Moody's stress-tested state budgets in their analyses. The idea, which was borrowed from the U.S. Federal Reserve, is to essentially throw different economic scenarios at a state budget to see how revenues would be impacted. Analysts found that states with a progressive income tax structure or states that are dependent on a volatile revenue source, such as oil and gas, tend to have more wild revenue swings in the event of a fiscal shock.

A total of 20 states have enough in reserves to get through a downturn comfortably, according to S&P. Moody’s found that 23 states are well-positioned when including other funds available to buffer the budget. That’s up from the 16 states Moody’s found last year when it issued its first stress-test analysis. Both analyses found that roughly a dozen states almost have enough in reserves to weather a moderate downturn.

But both analyses noted that an alarming number of states are still unprepared to get through even a moderate downturn without resorting to cuts. Moody’s found 17 states are in that category, up from 15 states last year. For S&P, 18 states have less than 70 percent of the reserves they need to absorb a fiscal shock.

This gap between prepared and ill-prepared governments holds true for cities as well. PNC Capital Markets analyst Tom Kozlik has previously noted that as much as 20 percent of state and local governments have seen their underlying credit quality decline -- some significantly so. Meanwhile, a Brookings Institution report released this summer notes that populous cities with a higher demand for services are more likely to have a harder time quickly adjusting to the budget pressures created by a recession.

On the state level, S&P Analyst Gabriel Petek says tax and income trends have conspired to create a more volatile revenue environment over the past decade as states have become more reliant on income tax revenue. That means that in the event of even a moderate recession, state budget shortfalls could be higher in some places than during the 2008 crisis.

Some of the least prepared governments -- namely, Illinois, Louisiana, New Jersey and Pennsylvania -- have repeatedly struggled to balance budgets, even as the economy has recovered. But even among these states, some will be hit worse than others, says Moody's White.

For example, Pennsylvania has a flat income tax, which means its revenue is less volatile and therefore is predicted to see no more than a 7 percent drop in revenue. New Jersey, on the other hand, "has a much more progressive income tax so its fiscal shock [could be] nearly 13 percent,” White says. “They have a much larger target to hit than Pennsylvania does.”

On the plus side, both firms note that governments have time to get ready. Economic forecasts predict the economy will continue to grow or be stable over the next year.

In other public finance news:

Will Congress Regulate States' Online Sales Taxes?

Three months after states successfully argued before the U.S. Supreme Court for the right to collect sales taxes for all online purchases made by their residents, Congress is getting involved.

A bill introduced this month includes an exemption for businesses that generate less than $10 million in annual U.S. e-commerce sales. It also prevents states from collecting sales taxes before Jan. 1, even though many states have already started collecting taxes or are scheduled to start in October.

The National Conference of State Legislatures (NCSL) and others argue that sales tax implementation should be left to the states. "Congress’ proposal," NCSL said in a statement this week, “would hinder state implementation efforts, preempt state authority, and create more problems than solutions.”

But others are concerned about the administrative burden to small businesses and online mom and pops. Indeed, some states have complex taxing structures, making implementation complicated.

The bill’s sponsor, Rep. Jim Sensenbrenner, a Wisconsin Republican, said in a statement that the bipartisan legislation “reins in the taxation free-for-all” created by the Supreme Court. “Online sellers need clarity and stability in the sales tax arena,” he said. “Our bill will protect small businesses and internet entrepreneurs from excessive regulatory burdens.”

Do Soda Taxes Work?

This question has hovered over the still-burgeoning practice of taxing sugary drinks to discourage consumption. Now, new research on Philadelphia’s soda tax by Mathematica Policy Research, has shed some light on the answer.

It found that after the soda tax went into effect more than a year ago, residents' buying habits shifted. Instead of buying taxed beverages in the city, residents bought more taxed beverages outside of it.

In fact, the percentage of Philadelphians reporting that their usual source of beverage purchases is outside the city increased by 17 percentage points, to roughly 33 percent. The full research was published this week as part of a National Bureau of Economic Research working paper.

The findings may provide fuel for those who have opposed the tax and claim that it will only hurt Philadelphia businesses.

By: Landon Wheeler of Legal Gambling

Congress is set to take a look at whether sports betting guidelines need to be implemented at the federal level as more states move towards legalized sports betting. A House Judiciary subcommittee has set up a hearing for September 27 which will be called “An Examination Of Sports Betting In America”. The hearing will be held in Washington, D.C.

The landscape of sports betting in the United States will be reviewed by the Subcommittee on Crime, Terrorism, Homeland Security and Investigation. Since the U.S. Supreme Court struck down PASPA 1992 in May, multiple states such as Delaware, Mississippi, New Jersey and West Virginia have started accepting sports bets while Pennsylvania and Rhode Island are also set to join the party.

Rep. Jim Sensenbrenner (R-Wis) said that his subcommittee will examine the implications of the court’s May ruling and discuss how it affects integrity in sports and what kind of improper or illegal activities could occur as a result of the decision. He explained that the subcommittee wants to figure out whether a federal framework is required to help guide gambling policies in individual states.

SOME SPORTS LEAGUES SHOW SUPPORT

Senate Minority Leader Chuck Schumer collaborated with some sports leagues and proposed sports betting guidelines about a month ago.

The NBA, PGA and MLB released a joint statement saying that nationwide standards to protect the integrity of sports are needed. The leagues are in favour of Schumer’s proposal and have asked that it be adopted by Congress.

STATES MOVING FAST TO LEGALIZE SPORTS BETTING

In August, Sen. Orrin Hatch (R-Utah) said that he planned to introduce sports betting legislation but no such bill has materialized. New Jersey Rep. Frank Pallone authored another federal sports betting bill but that has been put on hold. In the meantime, states are rushing to legalize sports betting.

On Tuesday, the District of Columbia put forward “The Sports Wagering Lottery Amendment Act of 2018” with the aim of legalizing sports betting in D.C. Over a dozen other states have also recently put sports betting bills forward.

New Jersey’s sportsbooks have already taken over $152 million in bets since mid-June. The American Gaming Association (AGA) said that about $150 billion is bet on sports in the United States with the majority of those bets being placed illegally.

In a statement, Sara Slane, assistant VP for the AGA said

Legal, regulated sports betting will enable increased transparency and enhance protections for consumers and bet and game integrity. We look forward to discussing the U.S. gaming industry's core principles for legalized sports betting with the Judiciary Committee at next week's hearing

By: Ryan Prete of Bloomberg Tax

Remote sellers and consumers should expect action on the newest federal online sales tax bill “definitely” before 2019, according to the lawmaker behind it.

Rep. Jim Sensenbrenner (R-Wis.) told Bloomberg Tax Sept. 20 that he is “very confident” that the Online Sales Simplicity and Small Business Relief Act of 2018 (H.R. 6814) will be considered in the House before the end of the year. If he’s right, it would be the first time such a bill would receive consideration in either chamber since 2013.

“I think there will be a markup that will then send the bill to the House floor, but this will of course be up to Chairman Goodlatte,” Sensenbrenner said.

He said that questions about the timeline for a markup and floor vote would have to be forwarded to Rep. Robert W. Goodlatte (R-Va.), who chairs the House Judiciary Committee. Goodlatte’s office didn’t immediately respond to a request for comment.

Goodlatte is often considered the main roadblock behind the lack of consideration for the multiple online sales tax bills, but he will retire at the close of 115th Congress in January.

Sensenbrenner’s bill, introduced Sept. 13, is the latest federal response to the U.S. Supreme Court’s June 21 South Dakota v. Wayfair ruling—which tossed out Quill Corp. v. North Dakota, the Supreme Court’s 1992 physical presence threshold for when states could tax remote sales. The majority in the 5-4 ruling suggested strongly that South Dakota’s law would pass constitutional muster; the law includes economic nexus thresholds of $100,000 or 200 transactions a year.

Sensenbrenner’s bill would:

  • ban states from retroactively imposing sales tax collection duties on remote online sellers;
  • require all states to push back economic nexus implementation dates to Jan. 1, 2019; and
  • establish a small-seller exemption, meaning a remote seller with gross annual receipts below $10 million in the U.S. isn’t required to collect and remit sales tax.

“This is a transition bill—it clarifies the items that were not specifically addressed by the Wayfair decision,” Sensenbrenner said.

Sales Tax Refunds?

Sensenbrenner said that if his bill is enacted, states that began collecting sales tax before Jan. 1, 2019, would have to refund the sales tax to the seller, who would then have to refund the tax to the purchaser or face potential legal battles.

“Every state that has a sales tax also requires the sellers to get sales tax collection permits, so the refund would not be very difficult,” he said. “The state doesn’t know who the purchasers were. An ethical seller would refund the sales tax to the purchaser, and if he didn’t refund it to the purchaser, then I think he would be subject to a lawsuit , probably in small claims court to force the refund to the purchaser.”

Sensenbrenner said the refund would be similar to, and as easy as, a credit card statement refund.

Of the 26 states that have enacted an economic nexus model, 19 currently have set implementation dates before Jan. 1, 2019. A complete list of states’ implementation dates is compiled below.

What About Use Tax?

Steve DelBianco, president and CEO of NetChoice, an e-commerce trade organization, defended Sensenbrenner’s bill, arguing that in the event the bill became law, any sales tax retained by a state before Jan. 1, 2019, could be retained to satisfy use taxes owed.

Use tax is a sales tax on purchases made outside one’s state of residence for taxable items that will be used, stored, or consumed in one’s state of residence and on which no tax was collected in the state of purchase, according to investopedia.

“Use taxes are the flip side of the coin, it’s the same tax, if you don’t owe sales tax you still owe use tax,” DelBianco told Bloomberg Tax. “The real intention of Sensenbrenner’s bill is to relieve businesses of far-too-soon state implementation dates. It’s a small thing to ask for states to wait until January.”

State Group Reaffirms Opposition

Jake Lestock, a policy specialist at the National Conference of State Legislatures (NCSL), said the organization and states are both concerned over unanswered questions present in Sensenbrenner’s bill.

“It would be great to assume a seller would refund a purchaser in the event the bill passes, but there is no language in the bill requiring this,” he told Bloomberg Tax. “I’ve talked with many attorneys about this legislation, and they all say it presents the case for a bunch of future lawsuits.”

“The faults in this bill show that it isn’t ready for the light of day yet, and the NCSL will continue to oppose this legislation,” he said.

The NCSL in a letter urged Congress not to advance federal proposals that seek to limit and delay the implementation of state economic nexus laws.

“As the states continue to ensure that remote sales tax implementation is done properly, we strongly urge you to respect these states’ efforts and not let legislation advance that would seek to hinder or halt implementation of the Wayfair decision by imposing federal requirements on remote sales tax collection,” the Sept. 18 lettersaid.

Why Now?

So why is Congress picking up speed in the online sales tax world now, after the high court already ruled on the issue?

Sensenbrenner said it is namely because of something the high court didn’t directly address: retroactivity.

“The Supreme Court decision did not talk about retroactivity, and there are some states that want to apply this retroactively, and for small sellers, this could subject them to audits in all 50 states,” Sensenbrenner said.

His bill would bar a state from imposing a sales tax collection duty on a seller before June 21, the date the Wayfair decision was issued.

Justice Anthony Kennedy only suggested in Wayfair that a state’s law was more likely to pass constitutional muster if the state didn’t push for retroactive taxes.

Pushing the Limits

Currently, no state has formally pursued retroactive back taxes, but Massachusetts and Rhode Island have danced around retroactive pursuits.

The Massachusetts “cookie nexus” regulation that was promulgated on Sept. 22, 2017, and applies to vendors making internet sales in Massachusetts was prospective as of its effective date, Oct. 1, 2017.

The state didn’t impose collection obligations before the law’s effective date, and the state therefore emphasized to Bloomberg Tax that it isn’t applying its law retroactively, though a retail group suing over the law in Virginia court has made those allegations.

Prompted by inquiries from taxpayers, the Massachusetts Department of Revenue issued a technical information release (TIR) this week, which stated that the standards for sales and use tax collection by remote sellers that were announced in the 2017 regulation continue to apply and aren’t affected by the Wayfair decision.

Rhode Island’s law requiring out-of-state vendors to either collect and remit or notify buyers took effect Aug. 17, 2017—well before the June 21 Wayfair decision. But it is an elective regime, requiring affected retailers either to (1) register and collect and remit or (2) comply with notice requirements. The state has therefore emphasized to Bloomberg Tax that its law isn’t imposing retroactive tax liability.

At one point Hawaii said it would go retroactive, but then changed its stance.

Other Online Sales Tax Bills

Sensenbrenner was also the lawmaker behind the No Regulation Without Representation Act of 2017 (H.R. 2887) (NRRA), which sought to codify Quill’s physical-presence standard. Sensenbrenner said the NRRA isn’t technically considered “dead” until the 115th Congress formally ends on Jan. 3, 2019.

The NRRA received a House Judiciary subcommittee hearing in July 2017.

Other active federal bills include:

None of the bills have advanced in the 115th Congress.

Implementation Dates

The implementation dates and nexus thresholds of 26 states that have enacted economic nexus statutes are below:

  • Alabama (Oct. 1, 2018), $250,000 in in-state sales;
  • Connecticut (Dec. 1, 2018), 200 transactions and $250,000 in in-state sales;
  • Georgia (Jan. 1, 2019), 200 transactions and $250,000 in in-state sales;
  • Hawaii (July 1, 2018), 200 transactions or $100,000 in in-state sales;
  • Illinois (Oct. 1, 2018), 200 transactions or $100,000 in in-state sales;
  • Indiana (Oct. 1, 2018), 200 transactions or $100,000 in in-state sales;
  • Iowa (Jan. 1, 2019), 200 transactions or $100,000 in in-state sales;
  • Kentucky (Oct. 1, 2018), 200 transactions or $100,000 in in-state sales;
  • Louisiana (Jan. 1, 2019), 200 transactions or $100,000 in in-state sales;
  • Maine (Implementation date not yet announced), 200 transactions or $100,000 in in-state sales;
  • Massachusetts (Oct. 1, 2017), 100 transactions and $500,000 in in-state sales;
  • Michigan (Oct. 1, 2018) 200 transactions or $100,000 in in-state sales;
  • Minnesota (Oct. 1, 2018), 100 transactions or $100,000 in in-state sales in at least 10 transactions;
  • Mississippi (Dec. 1, 2017), $250,000 in in-state sales;
  • North Dakota (Oct. 1, 2018, or 60 days after a remote retailers meets the state’s threshold—whichever is later), 200 transactions or $100,000 in in-state sales;
  • Ohio (June 30, 2017), $500,000 in in-state sales;
  • Oklahoma (July 1, 2018), $10,000 in in-state sales;
  • Pennsylvania (April 1, 2018), $10,000 in in-state sales;
  • Rhode Island (Aug. 17, 2017), 200 transactions or $100,000 in in-state sales;
  • South Carolina (Nov. 1, 2018), $100,000 in in-state sales;
  • South Dakota (Nov. 1, 2018), 200 transactions or $100,000 in in-state sales;
  • Tennessee (currently on hold due to litigation), $500,000 in in-state sales;
  • Utah (Jan. 1, 2019), 200 transactions or $100,000 in in-state sales;
  • Vermont (July 1, 2018), 200 transactions or $100,000 in in-state sales;
  • Washington (Oct. 1, 2018), 200 transactions or $100,000 in in-state sales;
  • Wyoming (Oct. 1, 2018), 200 transactions or $100,000 in in-state sales.

By: Philip Conneller of Casino.org

A long-rumored congressional hearing on sports betting was finally confirmed Thursday and penciled in for next Tuesday, September 27.

Rep. Jim Sensenbrenner (R-Wis.), chairman of the House Subcommittee on Crime, Terrorism, Homeland Security and Investigation, will lead the hearing, “An Examination of Sports Betting in America.”

Specifically, the subcommittee will examine whether a “basic federal framework is necessary to guide states’ new gambling policies.”

Speaking to press Thursday, Sensenbrenner made no mention of working on actual legislation to regulate sports betting federally. Instead, there is a feeling that Congress could provide a framework of guidance to promote uniformity among states who opt to regulate.

"My subcommittee will look at the implications of this SCOTUS ruling and talk about what it means for the integrity of sports as well as what sorts of improper or illicit activities could arise,” said Sensenbrenner."

This chimes with the view of Senate Minority Leader Chuck Schumer (D-New York), who last month declared it was “incumbent on the federal government to take a leadership role and provide the necessary guidance to prevent uncertainty and confusion for the leagues, state governments, consumers and fans alike.”

Senator Hatch’s Plan

In May, the US Supreme Court struck down PASPA, the federal law that prohibited states from regulating sports betting within their own borders, calling it a “direct affront to state sovereignty.”

“Congress can regulate sports gambling directly, but if it elects not to do so, each state is free to act on its own,” declared the SCOTUS majority.

Sen. Orrin Hatch (R-Utah) has vowed he will do just that. He believes Congress cannot permit sports betting to “proliferate amid uneven enforcement in a patchwork race to the regulatory bottom.”

In late August, he promised to submit federal legislation regulating sports betting to the Senate “within weeks.”

Hatch can be forgiven for taking it personally. He was one of the authors of PASPA — and it’s got to smart to see your work shot down in flames by seven Supreme Court judges.

And speaking of Supreme Court judges, Hatch has good reason to have put his bill on the backburner this week. The senator has devoted much of his energy to defending President Trump’s pick for the Supreme Court, Brett Kavanaugh, who Democrats have been interrogating about gambling habits, among many other things.

In League with the Leagues

The major sports leagues are all for federal intervention. They’re alarmed by the rapidity with which states have fast-tracked sports betting regulation since the SCOTUS decision with barely a thought for their naked self-interest.

"As legalized sports betting spreads across the states, there is a need for consistent, nationwide integrity standards to safeguard the sports millions of fans love,” said the NBA, PGA, and MLB said in a joint statement in support of Schumer.

A federal framework would mean the leagues’ lobbyists would only have to win the argument once, rather than dozens of times against state lawmakers across America who are likely to respond they’re doing the job just fine, thanks.

“Across the country, more than 4,000 dedicated public servants effectively regulate the commercial and tribal casino industry, including sports wagering,” the American Gaming Association wrote in a letter to Schumer this week.

“Replacing an already proven regulatory regime with a non-existent and untested federal oversight apparatus would be out of step with 7 in 10 Americans who think this decision should be left to each state and tribe.”

By: David Purdum of ESPN

Congress is ready to examine whether federal sports betting guidelines are needed as more states begin to open regulated sportsbooks.

On Thursday, a House Judiciary subcommittee scheduled a hearing titled "An Examination of Sports Betting in America" for Sept. 27, in Washington, D.C.

The Subcommittee on Crime, Terrorism, Homeland Security and Investigation will review the current U.S. landscape in the aftermath of a U.S. Supreme Court decision in May that struck down the Professional and Amateur Sports Protection Act of 1992 and opened a path for states to offer legal sports betting. Since the ruling, Delaware, Mississippi, New Jersey and West Virginia have joined Nevada in offering full-scale sports betting, and Pennsylvania and Rhode Island are also gearing up.

"My subcommittee will look at the implications of this SCOTUS ruling and talk about what it means for the integrity of sports as well as what sorts of improper or illicit activities could arise," said subcommittee chairman Rep. Jim Sensenbrenner (R-Wis.). "Ultimately, we want to determine whether or not a basic federal framework is necessary to guide states' new gambling policies."

Next week's hearing was scheduled nearly a month after Senate Minority Leader Chuck Schumer (D-N.Y.) released sports betting guidelines, with the support of some professional sports leagues.

"As legalized sports betting spreads across the states, there is a need for consistent, nationwide integrity standards to safeguard the sports millions of fans love," the NBA, PGA Tour and Major League Baseball said in a joint statement. "We strongly support the legislative framework outlined by Senator Schumer and we encourage Congress to adopt it."

Committee hearings are often postponed. Previously, the same House Judiciary subcommittee scheduled a hearing on sports betting for late June, but it was scrapped abruptly the morning after it was put on the official calendar amid the immigration firestorm over children being separated from their families.

Sen. Orrin Hatch (R-Utah) said in late August that he was planning to introduce sports betting legislation "in weeks," but with Hatch prominently involved in the controversy over Supreme Court nominee Brett Kavanaugh, no new bill has surfaced.

Another federal sports betting bill, titled the GAME Act and authored by New Jersey Rep. Frank Pallone also has been put on hold, as first reported by industry trade publication GamblingCompliance and confirmed by ESPN.

Meanwhile, states are moving quickly to pass legislation and regulations for sports betting. On Tuesday, "The Sports Wagering Lottery Amendment Act of 2018" was introduced in the District of Columbia, aiming to legalize sports betting. More than a dozen additional states have introduced recent sports betting bills.

More than $152 million has been bet on sports at New Jersey sportsbooks since mid-June, when Monmouth Park race track and at the Borgata in Atlantic City began taking wagers.

The American Gaming Association estimates that Americans bet $150 billion on sports annually, the bulk of it in a black market made up of offshore sportsbooks and local bookmakers.

"Legal, regulated sports betting will enable increased transparency and enhance protections for consumers and bet and game integrity," American Gaming Association senior vice president Sara Slane said in a statement Thursday. "We look forward to discussing the U.S. gaming industry's core principles for legalized sports betting with the Judiciary Committee at next week's hearing."

By: Roger Russell of Tax Pro Today

The fallout from Wayfair continues – and the most recent development highlights the potential for the Supreme Court decision to unleash a patchwork of burdensome and confusing state sales tax rules.

The Colorado Department of Revenue announced on Sept. 11 that it will require out-of-state retailers who do business in Colorado to obtain a sales tax license.

The Department said the change is a result of the Supreme Court decision in South Dakota v. Wayfair, which struck down the requirement that a retailer have a physical presence in a state in order to be required to collect and remit sales tax.

“Tax collection at the point of sale eases the process for our residents and creates a level playing field for Colorado businesses, as out-of-state retailers will be required to collect state sales tax, just as in-state retailers do today,” said Colorado Department of Revenue executive director Michael Hartman.

Guidance for out-of-state retailers will be provided by administrative rule and will be consistent with the court’s decision, including prospective application and a small-seller exception for retailers whose in-state sales do not exceed $100,000 or 200 transactions annually.

“The Department will ensure fair, efficient and transparent implementation of this decision,” Hartman said. “We will pave the least burdensome road possible for businesses to comply with these regulations.”

Scott Peterson, vice president of U.S. tax policy and government relations at Avalara, and former executive director of the Streamlined Sales Tax Governing Board, was somewhat taken aback.

“Even though Colorado has been talking about this for years, I was surprised to see the state take this action, given how little has been done to reduce their complicated sales tax,” he said.

“A few years ago, when Congress seemed interested in giving states this kind of authority, the Colorado legislature enacted a law to take advantage of that authority,” he said. “The law was only going to apply to the state sales tax, with the option for local governments if they made the simplification changes then outlined in federal legislation.”

“Since Congress didn’t enact anything, this issue lay dormant until last year, when the state created a sales tax simplification task force. Members of that task force came from the legislature, industry, local government and the accounting industry,” Peterson said. “I presented at one of their meetings last year and thought they were making progress toward addressing the complexity that exists in their sales tax. I was wrong, but I thought the state would wait until more was accomplished.”

Despite the small-seller exception, which matches South Dakota’s exception, Colorado’s sales tax system is anything but simple.

“The problem with Colorado is that they allow their major home rule cities to basically come up with their own sales tax code, which doesn’t have to conform to the state,” said Marvin Kirsner, a shareholder at law firm Greenberg Traurig.

“Many states have passed or adopted similar rules,” he noted. “The $100,000-in-sales threshold for South Dakota may be reasonable because South Dakota has less than a million people, but there are states with far more. A lot of small merchants will be caught. In my own practice, I have seen medium-size business remote sellers, bigger than mom and pops, struggling to get ready in a short amount of time. Most of the state statutes have an effective date of Oct. 1, and some states are looking to enforce retroactivity. They’re counting on people not being able to hire attorneys and go through the state court systems.”

“Colorado’s sales tax system is a mess,” agreed Andrew Moylan, head of the National Taxpayers’ Union’s Interstate Commerce Initiative. “The problem is that they have a very inefficient and outdated system that would be unlikely to survive a legal challenge, even after the Wayfair decision.”

“They have hundreds of taxing jurisdictions. In effect, localities in Colorado are allowed to define and administer a sales tax completely independent from the state,” he explained. “They set their own base, their own rates, and audit separately. Previously it wasn’t an issue because they only imposed it on their own residents. But thousands of retailers across the country have sales there.”

“They cite the $100,000 threshold as if it gives them blanket authority, but the Supreme Court cited other features of South Dakota’s system, one of which is that South Dakota is a member of [Streamlined Sales Tax]. As a result, South Dakota has a system that is relatively easy to implement, and that’s clearly not the case with Colorado. It’s certain to bring litigation.”

Moylan believes a bipartisan bill will go a long way toward clearing up some of the mess in the wake of Wayfair. Rep. Jim Sensenbrenner, R-Wisconsin, joined Rep. Anna Eshoo, D-California, Rep. Zoe Lofgren, D-California, and Rep. Jeff Duncan, R-South Carolina to introduce the Online Sales Simplicity and Small Business Relief Act of 2018. It would ban retroactive taxation, delay implementation of hastily crafted post-Wayfair laws, and establish a small-seller exception of $10 million in sales.

“It can’t pass soon enough,” said Moylan. “Some states, like Florida, have threatened retroactive taxation. Michigan and North Carolina, among others, have plowed ahead with collection rules despite lacking a statutory basis for them. States like Washington and Pennsylvania seek to impose tax obligations on truly tiny businesses, for whom collecting sales taxes nationwide is a daunting and expensive prospect. And states like Colorado and Louisiana have moved ahead with schemes that are obviously unconstitutional in their scope and reach.”

Moylan believes the Sensenbrenner bill has a good chance of passing.

“It’s bipartisan, and it deals with important issues,” he said. “But it won’t be on the president’s desk next week. There are always forces aligned against bills like this.”

As published in Bicycle Retailer

WASHINGTON (BRAIN) — A new bi-partisan bill introduced in the U.S. House would create a federal framework for collecting state sales taxes on online sales, as required by the U.S. Supreme Court's Wayfair decision in June.

Among other things, the bill includes an exemption for businesses that generate less than $10 million in annual U.S. e-commerce sales. It also would prohibit states from trying to collect retroactive sales taxes from sales prior to the June 21 decision.  It also prevents states from imposing sales tax collection duties before Jan. 1, 2019

The legislation is called the Online Sales Simplicity and Small Business Relief Act and was sponsored by Reps. Jim Sensenbrenner (R-Wis.), Anna Eshoo (D-Calif.), Jeff Duncan (R-S.C.) and Zoe Lofgren (D-Calif.).

The $10 million exemption would only apply until the states produce Congressionally-approved laws that would simplify sales tax collection to the point where the exemption would be unnecessary.

"This bipartisan legislation reins in the taxation free-for-all created by the Supreme Court's ruling in Wayfair," Sensenbrenner said 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."

The bill is the third piece of legislation introduced in the House since the Wayfair decision.

By: Zak Stambor of Digital Commerce

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.

Last-ditch effort

September 17, 2018

By: Bernie Becker of Politico Morning Tax

WELL, WHAT DO WE HAVE HERE? It’s now been almost three months since the Supreme Court blew open the landscape on online sales tax, and now we’ve got a response from Congress.

A bipartisan quartet of House members led by Rep. Jim Sensenbrenner (R-Wis.) rolled out new legislation on Friday, Pro Tax’s Aaron Lorenzo reports — which would, among other things, bar states from doing any collecting from out-of-state online vendors until 2019.

To be clear: In the best of circumstances, it’d be difficult for this kind of legislation to get through Congress, especially with just over three months left until a new crop of lawmakers takes over. For starters, a large group of bipartisan lawmakers supports the Supreme Court’s decision.

And while those supporters originally thought Congress might be needed for cleanup legislation, they no longer believe there’s a need for lawmakers to act. So in the end, where someone stands on how chaotic it’s been in the aftermath of the Supreme Court’s Wayfair decision appears to correlate with their stance on the Sensenbrenner bill.

Opponents of the Wayfair decision believe that the aftermath has been unruly and tumultuous for businesses, leading them to embrace Sensenbrenner’s proposals — including to exempt businesses with under $10 million in sales from having to collect for other states, and to ban states from forcing retroactive collection, something that the Supreme Court endorsed as well. But supporters of the Supreme Court’s ruling argue that states have acted in a very orderly fashion, and are working to make it fairly simple for businesses to comply with the new landscape.

WELCOME BACK to a new week of Morning Tax. Your regular author has become one of those people who goes to the beach in September, and will be taking off the rest of the week. Be sure to send those tips to the rest of the team!

Today also marks 57 years since the opening of the Pittsburgh Civic Arena, the first major sports venue in the world to have a retractable roof and the backdrop for Jean-Claude Van Damme’s 1995 opus Sudden Death. (Tax angle: Built with a combination of public and private money, for around $22 million — well under $200 million in today’s dollars, far less than the current going rate for sports arenas.)

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