December 11, 2018
A federal bill that would prohibit states from taxing remote sellers until 2020 while codifying a temporary exemption for businesses has been introduced by four Democratic senators from two states without a sales tax.
S.B. 3275, filed Thursday by the senators from New Hampshire and Oregon, would enact a moratorium on taxing remote sales until Jan. 1, 2020, prevent retroactive collection and shield businesses with less than $10 million in annual sales from the tax until the U.S. Congress approves an interstate compact with clearly defined nexus thresholds.
The bill’s primary sponsor, Sen. Jeanne Shaheen, D-N.H., said Friday that a federal barricade against the tax would provide businesses ample time to adapt to the country's new tax landscape in the wake of the U.S. Supreme Court’s landmark decision in South Dakota v. Wayfair. That decision, issued in June, no longer requires companies to have a physical presence in a state to be subject to sales and use taxes. The bill would bar states from taxing any remote sales that occurred prior to that date.
“Forcing New Hampshire businesses to adopt and adhere to a new, complicated tax collection system, particularly as retailers approach the busiest time of the year, is entirely unfair and impractical,” Shaheen said in a Friday statement. “New Hampshire doesn’t collect a sales tax, and our small businesses shouldn’t have to bear this burden for other states.”
Joining Shaheen in sponsoring the bill are fellow New Hampshire Democratic Sen. Maggie Hassan and Oregon Democratic Sens. Jeffrey A. Merkley and Ron Wyden. Those four senators sent a letter to the Senate leadership in November, arguing for the passage of legislation akin to S.B. 3275 before the current session ends Jan. 3.
In their letter, the senators said federal lawmakers should grant a reprieve to businesses that face the possibility of complying with thousands of taxing jurisdictions nationwide. Wyden doubled down on that stance in a Friday statement.
“Action by Congress is the only way to give small businesses more time to prepare for this new and disastrous internet sales tax regime,” Wyden said.
Several states that have already enacted remote sales tax laws or rules began taxing out-of-state transactions earlier this year, with more eyeing Jan. 1 as their remote tax rollout date. Not all of those states share the same small business exemptions, with nexus parameters ranging from $10,000 to $250,000 in annual sales into a state per year.
The bill’s $10 million annual sales threshold would give way to congressional approval of an interstate compact that contains bright-line nexus thresholds and simplifies the process of registering, collecting and remitting the tax. Currently, 24 states are members of the Streamlined Sales and Use Tax Agreement, which simplifies the tax regimes of its participants. However, it is not universal among states and has never been ratified by Congress.
Craig Johnson, executive director of the Streamlined Sales Tax Governing Board, did not return a phone call seeking comment Monday.
The bill’s text mostly represents a blend of two bills Rep. Jim Sensenbrenner, R-Wis. has introduced to the U.S. House of Representatives in the last three months, with the chief difference being the date the proposed remote tax ban would be lifted.
In September, Sensenbrenner filed H.R. 6824, which called for a Jan. 1, 2019, start date for remote tax and included the same $10 million small-seller exemption and interstate compact ratification included in the senators’ bill. In late November, he introduced H.R. 7184 to bar states from taxing any remote sales that occurred prior to the date the Wayfair opinion was issued. Neither of those bills have had a hearing.
Christopher Krepich, a spokesman for Sensenbrenner, told Law360 via email Monday that the congressman would support S.B. 3275 if it passed the Senate, and believes there is still enough time for lawmakers to act if the measure is fast-tracked in the session’s waning weeks.
None of the senators responded to a question asking if they expected the bill to have a hearing by the Senate Finance Committee before the session ends.
--Additional reporting by Maria Koklanaris. Editing by Neil Cohen.