September 14, 2018
By: Ryan Prete of Bloomberg BNA
Congress isn’t giving up on trying to regulate online sales tax collections.
Rep. Jim Sensenbrenner (R-Wisc.) introduced the Online Sales Simplicity and Small Business Relief Act of 2018 late Sept. 13. The 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.
Of the 25 states that have enacted an economic nexus model, only two—South Dakota and Maine—prohibit the state from applying their laws retroactively. This doesn’t mean all other states are guaranteed to pursue retroactivity; it just means that all other states haven’t legally barred themselves from the activity.
The bill 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.
Since the pivotal court decision, dozens of states are passing versions of South Dakota’s law or enforcing existing nexus laws and rules they already have on the books.
The court didn’t rule on the validity of South Dakota’s law in the absence of Quill, but the state Sept. 12 enacted two bills paving the way for taxation of online sales to begin there. The first bill removed a legislatively enacted injunction barring the state from enforcing its 2016 law. The second bill requires marketplace facilitators like Amazon.com Inc., eBay Inc., and Etsy Inc. to collect and remit taxes on behalf of their third-party sellers.
This isn’t Sensenbrenner’s first foray into remote sales tax. In 2017, he introduced the No Regulation Without Representation Act of 2017 (H.R. 2887) (NRRA), which sought to codify Quill’s physical-presence standard. The bill received a House Judiciary subcommittee hearing in July 2017.