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By: Robert Mann of Gaming Today

A diverse line-up of witnesses is now scheduled for Thursday’s federal hearing on sports wagering in Washington, D.C.

The House Judiciary Subcommittee on Crime, Terrorism, Homeland Security, and Investigations hearing is called “Post-PASPA: An Examination of Sports Betting in America.” The subcommittee is charged with reviewing testimony on the national consequences of the legalization of sports wagering.

The scheduled witnesses are:

• Jocelyn Moore, executive vice president of communications and public affairs at the NFL;

• Sara Slane, senior vice president of public affairs at the American Gaming Association;

• Becky Harris, chair of the Nevada Gaming Control Board;

• Jon Bruning, counselor at the Coalition to Stop Internet Gambling (CSIG);

• John Warren Kindt, professor at the University of Illinois.

A spokesperson for Rep. Jim Sensenbrenner (R-Wis.), who chairs the subcommittee, told Bloomberg Monday the chairman “looks forward to hearing from these witnesses who represent a wide variety of positions on sports betting.”

By: Adam Candee of Legal Sports Report

For the first time since the Supreme Court repealed PASPA in May, Congress will take up the subject of legal sports betting this week.

The hearing entitled “Post-PASPA: An Examination of Sports Betting in America” will take place in the House Subcommittee on Crime, Terrorism, Homeland Security, and Investigation, a subcommittee of the House Judiciary Committee.

Let’s take a closer look at what to expect when legislators gather to discuss the country’s sports betting industry …

When and where will the hearing be?

The hearing starts at 10 a.m. EDT Thursday. It will take place at the Rayburn Building on Capitol Hill in Washington, D.C.

You can watch a live stream of the hearing hereLegal Sports Report will have ongoing coverage Thursday throughout the hearing.

Why is Congress looking at sports betting?

Sports betting was settled law in the United States for 26 years before May. That’s when the Supreme Court ruled PASPA unconstitutional via the Murphy v. NCAA case.

Pro sports leagues and the NCAA supported PASPA’s long-standing blanket ban on single-game sports betting outside Nevada. They fought for years against New Jersey in the Murphy case and remain unhappy about the loss of PASPA.

The high court ruled in May that states now could make their own sports betting rules, absent a new federal law. Since then, DelawareNew JerseyMississippi, and West Virginia have begun legal sports bettingRhode Island and Pennsylvania likely will start their operations within 2018 as well.

State-level lobbying efforts have not yielded much of what the leagues now want: a cut of the profits from legal sports betting. They also prefer not to fight for that cut in every state, so they are lobbying Congress for a new federal solution.

The leagues found an ally in Sen. Chuck Schumer (D-NY), the Senate Minority Leader. Schumer earlier this month proposed new federal sports betting guidelines that Congress could enact or states could follow. Unsurprisingly, the terms heavily favor the leagues, which are headquartered in New York.

Sen. Orrin Hatch (R-UT), a co-author of PASPA, also wants a new federal law. Hatch reaffirmed his position as the Senate’s anti-sports betting spokesperson quickly after the Supreme Court decision.

Is there a sports betting bill?

In short, no. That does not guarantee we are free and clear from one appearing, though.

Hatch twice promised to introduce a new federal law after the repeal of PASPA. He has not yet dropped that bill.

Schumer’s proposed framework is not a bill and does not look ready-made to become one. He also left open the possibility that his preferred guidelines are used by states crafting their own laws.

Rep. Frank Pallone (D-NJ) recently withdrew the GAME Act bill he proposed in the House. Pallone introduced the legislation on the day the Supreme Court heard arguments on PASPA. Its utility largely expired once state-level sports betting bills became legal.

The legislation from Pallone, a longtime supporter of sports betting in New Jersey, appeared more friendly to states and casinos than what can be expected from Hatch or Schumer.

Who is testifying in the hearing?

The subcommittee will hear testimony from five people:

  • Sara Slane, senior vice president, public affairs, American Gaming Association
  • Becky Harris, chair, Nevada Gaming Control Board
  • Jocelyn Moore, executive vice president, communications and public affairs, National Football League
  • Jon Bruning, counselor, Coalition to Stop Internet Gambling (CSIG)
  • Les Bernal, national director, Stop Predatory Gambling

Some sources indicate John Kindt, an anti-gambling professor from the University of Illinois, also will appear.

A breakdown of what to expect from their testimony can be found here. Expect Slane and Harris to back the rights of states to craft their own legislation, while Bruning and Kindt warn of the vices of iGaming. Moore will present the NFL’s position, which favors a federal law but not integrity fees.

Who is on the committee? Are any of the states that have legalized sports betting represented on the committee?

Here are the members of the subcommittee:

  • James Sensenbrenner Jr. (R-WI), Chair
  • Louie Gohmert (R-TX), Vice Chair
  • Sheila Jackson Lee (D-TX), Ranking Member
  • Karen Bass (D-CA)
  • Steve Chabot (R-OH)
  • Val Demings (D-FL)
  • Trey Gowdy (R-SC)
  • Hakeem Jeffries (D-NY)
  • Mike Johnson (R-LA)
  • Ted Lieu (D-CA)
  • Ted Poe (R-TX)
  • Jamie Raskin (D-MD)
  • John Ratcliffe (R-TX)
  • Cedric Richmond (D-LA)
  • Martha Roby (R-AL)
  • Keith Rothfus (R-PA)
  • John Rutherford (R-FL)

What might jump out at you is that none of the subcommittee members hails from a state with legal sports betting. Only Rothfus represents a state with a sports betting law on the books, although Pennsylvania is not live.

Considering the potential for hyperbole in some of the testimony, the knowledge level of subcommittee members can be speculated upon. Can they weather any bluster or scare tactics to get to the substance of what is happening today in US legal sports betting?

By; Matt Rybaltowski of Forbes

As key stakeholders prepare for a sports betting hearing this week in Washington D.C., it is safe to say that the hearing will garner less attention than a more publicized one Thursday morning on Capitol Hill.

At 10 a.m. ET on Thursday, the U.S. House Subcommittee on Crime, Terrorism, Homeland Security and Investigations will convene for a highly anticipated hearing on the state of the legalized sports gambling market. The hearing inside the Rayburn House Office Building will take place less than a mile from testimony in Brett Kavanaugh's Supreme Court confirmation hearing, scheduled to begin at the same hour inside the Dirksen Senate Office Building. While a media firestorm is expected throughout the day outside the chambers, sports betting experts will be more focused on a bevy of key gaming issues that could arise down the street on Independence Avenue.

The hearing, entitled Post-PASPA: An Examination of Sports Betting in America, will be the first by Congress since the Supreme Court rocked the gambling world with a historic ruling in May. In a 6-3 vote, the Court struck down a quarter-century federal ban on sports gambling in the U.S. Ever since, a debate has intensified on whether the activity should be strictly regulated by the federal government or if the responsibility should be left to the states. Already, four states -- New JerseyDelaware, Mississippi and West Virginia -- have legalized sports gambling over the last three months.

Five witnesses are scheduled to testify at the hearing including the Nevada Gaming Control Board Chair Becky Harris, NFL Executive Vice President of Communications and Public Affairs Jocelyn Moore and American Gaming Association Senior Vice President of Public Affairs Sara Slane. The hearing will be chaired by Rep. James Sensenbrenner, a Wisconsin Republican. The chairman is looking forward to hearing a cross-section of opinions from a wide array of witnesses on whether sports betting should be heavily regulated, a Sensenbrenner spokesperson said.

Here are some key issues to monitor during Thursday's hearing:

What is the likelihood that Congress will eventually impose a federal framework for the legal sports betting market in the U.S.?

This is the million dollar question that carries widespread ramifications over the next several years, as legalized sports betting proliferates around the country.  Last month, Senate Minority Leader Chuck Schumer outlined a policy proposal aimed at creating robust consumer protections for gamblers and ensuring integrity in professional sports. A comprehensive federal framework that oversees the legal market will likely be embraced by commissioners in the Big 4 sports leagues, including NFL commissioner Roger Goodell. Shortly after the Court's decision, Goodell urged Congress to enact uniform standards for sports gambling, echoing the position of his counterparts in the other leagues. 

Such a framework has been met with resistance from the American Gaming Association, a leading trade group for the gambling industry. The group, which supports 1.8 million jobs nationwide, instead favors policies that empower state and tribal regulations. Current regulations for other forms of gaming already address age restrictions, record keeping requirements, licensing and suitability determinations, Slane wrote in a Sept. 13 letter to Schumer's office. In addition, U.S. casinos are subjected to strict anti-money laundering protocols from state regulators in order to combat structuring attempts from organized crime networks, an activity that could prosper as the legal sports gambling market expands. Both Slane and Harris may inform committee members on a rigorous model in Nevada, where regulators continually strive to protect the safety of the market.

Mandates for gaming operators on the use of a professional sports league's official data  

Over the summer, the NBA announced a historic partnership with MGM Resorts International that designated the company as the official gaming partner of the league. The deal provides MGM with access to the league's official data on a non-exclusive basis. In some respects, the access to the league's real-time data feed could give MGM a competitive advantage over competitors, namely with in-game wagering when speed is at a premium.

Schumer's proposal requires the use of official league data in determining betting outcomes, a provision that has been opposed by the AGA. As intellectual property creators of the data, the NBA believes it should receive proper compensation. The AGA, on the other hand, argues that there is "neither a need, nor a legal precedent" to mandate gaming operators to purchase data from the leagues. "Mandating every sportsbook contract with only one official data company will allow individual, preferred data providers to set inflated, non-competitive monopoly prices for their services," Slane wrote in the letter. Two states, New York and Missouri, have pending bills with language regarding the use of professional sports league data in determining sports wagering outcomes.

Societal effects of gambling addiction on Millennials and the nation as a whole

Schumer and Sen. Orrin Hatch, a co-author of the Professional and Amateur Sports Protection Act of 1992, have taken steps to address the epidemic of problem gambling across the nation. For its part, the AGA sides with Schumer in advocating for vigorous safeguards to adequately protect consumers.

John Warren Kindt, a professor at the University of Illinois, received inclusion on the committee's preliminary list but was omitted from a revised one on Wednesday. Kindt, who has written extensively on problem gambling issues, described sports gambling as a "gateway drug," to gambling addiction in a 2012 U.S. News & World Reports column. By legalizing sports betting, states can expose themselves to additional taxpayer costs for crime and the creation of new financial products that could lead to a potential "speculative bubble," he indicated at the time. The committee is scheduled to hear from Les Bernal, national director of Stop Predatory Gambling. Bernal's testimony could be watched closely by the leagues.

Curbing the influence of the Black Market

According to various estimates, Americans wager upwards of $100 billion annually on sports. The actual amount is difficult to ascertain given the complexity of monitoring betting patterns on the illegal, offshore market. Some gaming experts argue that high state tax regimes will simply push bettors away from regulated sports books back to the black market. The illegal market lacks consumer protections and threatens the integrity of sports, Rep. Dina Titus, a Nevada Democrat, wrote in a Sept. 25 letter to Sensenbrenner. Titus also took exception to a so-called integrity fee that some leagues have proposed in recent months. "Calls for integrity fees paid to leagues would chip away at state revenues and already slim margins for legal sportsbooks, hurting their ability to compete with offshore books and move more consumers to the regulated market," she wrote. The committee could also address implications of the Wire Act in the Post-PASPA era on the unregulated black market. 

Response to palpable errors from pricing systems used by gaming operators to set odds

In an abrupt U-turn last week, FanDuel Sportsbook agreed to pay a small number of bettors who received erroneous odds of 750-1 on the Denver Broncos to defeat the Oakland Raiders on Sept. 16. For a period of 18 seconds, the book listed incorrect odds on the Broncos to win the game outright due to a pricing error. FanDuel initially declined to honor a $110 ticket that would have paid approximately $82,000, before changing its stance days later. Though palpable errors are well-documented in Europe, the incident represented the first time a legal book in New Jersey experienced a major gaffe since the state legalized sports betting. Legislators could be interested in the types of internal controls that books need to maintain to limit the occurrences.

By: Ryan Prete of Bloomberg

The three states that have recently opened their doors to legalized sports betting have already collected slightly more than $3 million in tax revenue.

Delaware continues to see a steady flow, while Mississippi and West Virginia are grappling with their first revenue figures since offering the activity. Policy specialists expect revenue totals to grow as the National Football League season continues.

“Gambling and football are intertwined like no other sport. Even non-gamblers know the point spread for their games. All the pregame shows do [game] picks with Vegas lines,” Richard Auxier, a research associate at the Urban-Brookings Tax Policy Center, told Bloomberg Tax.

Amid all the state-side activity, federal lawmakers have scheduled a Sept. 27 hearing on sports betting.

Tax Revenue Totals

Delaware was the first state to take bets, opening its doors to the activity on June 5. From June 5 through July 29, the state took in nearly $23 million in wagers, according to its lottery record. Delaware’s law allows the state to keep 50 percent of the proceeds from the activity, which means about $2.04 million for the state after winning bets were paid.

Mississippi began offering bets Aug. 1, and through Sept. 3 the Magnolia State had issued $9.8 million in wagers. Mississippi has a 12 percent tax on sports betting, which equates to $1.2 million in state revenue through the five weeks.

West Virginia opened its door to legal betting on Aug. 30, and has released totals through only the first week of legalized betting. From Aug. 30 through Sept. 2, West Virginia took in $320,631 in wagers; taxing those bets at 10 percent, the state yielded $32,063 in revenue.

New York, Pennsylvania, and Rhode Island have legalized sports betting, but haven’t begun taking bets.

The U.S. Supreme Court cleared the way for states to allow bets on sports in its May ruling in Murphy v. NCAA, which repealed the federal Professional and Amateur Sports Protection Act of 1992 (PASPA). That law had prohibited states from “authorizing” gambling related to professional and amateur sports leagues.

NFL Season Will Boost Revenue

The NFL’s influence is visible in Mississippi’s sports betting totals. Of the state’s $9.8 million wagered from Aug. 1 through Sept. 3, $3.5 million was wagered in just the first three days of September, during the NFL’s last week of preseason games. The $3.5 million wagered in three days is nearly half of all bets placed during August.

“Betting revenue will obviously increase during the NFL season, and more states will legalize it, but they must realize that this is a low-margins business and should not be looked at as a way to fill budget holes,” Sara Slane, senior vice president of public affairs at the American Gaming Association, has told Bloomberg Tax.

In 2018, 19 states proposed legislation to legalize sports betting, and Slane said she expects at least the same number to push for the activity during the upcoming session.

A Short-Term Trend?

Auxier said states should be worried about competition.

“For example, Delaware and West Virginia would probably see a dip in revenue if the District of Columbia legalizes sports betting. And when we get to the point where sports gambling is near-universal, you might also see tax rates come down a little—further reducing revenue,” Auxier said. “Sports gambling is all about trends, right? This is a positive trend. But it’s a short-term one.”

District of Columbia council member Jack Evans (D) introduced a bill Sept. 18 that would allow bets and levy a 10 percent tax on gross revenue from wagers.

In gauging a state’s potential revenue numbers, Auxier pointed Bloomberg Tax to Nevada’s 2017 sports betting revenue, which was nearly $250 million. However, Nevada’s 6.75 tax rate means the state only saw about $17 million in tax revenue from the activity.

Auxier said that $17 million only equates to 0.01 percent of Nevada’s total state general revenue. He predicted that sports betting revenue won’t surpass 1 percent of total state tax revenue in any jurisdiction that legalizes it.

Federal Spotlight on Sports Betting

Sports betting has been an area of focus for federal lawmakers in the months following the high court’s reversal of PASPA.

The House Judiciary Subcommittee on Crime, Terrorism, Homeland Security, and Investigations is set to host a Sept. 27 hearing titled “Post-PASPA: An Examination of Sports Betting in America.” It remains unclear what lawmakers will focus on during the hearing, as there hasn’t yet been a federal proposal introduced in either chamber of Congress.

Slane will be among those testifying before the subcommittee. She will be joined by:

  • Jocelyn Moore, executive vice president of communications and public affairs at the NFL;
  • Becky Harris, chair of the Nevada Gaming Control Board;
  • Jon Bruning, counselor at the Coalition to Stop Internet Gambling (CSIG); and
  • John Warren Kindt, professor at the University of Illinois.

A spokesperson for Rep. Jim Sensenbrenner (R-Wis.), who chairs the subcommittee, told Bloomberg Tax Sept. 24 that the chairman “looks forward to hearing from these witnesses who represent a wide variety of positions on sports betting.”

The upcoming hearing follows recent calls for federal intervention from Senate leadership.

On Aug. 29, Senate Minority Leader Charles E. Schumer (D-N.Y.) proposed a “desperately needed” federal sports betting framework, a move that state tax policy specialists say could hurt state sovereignty and tax revenue pursuits.

Schumer also published a memo that included three principles he deems necessary in a framework: protecting young people and those suffering from gambling addiction, protecting the integrity of the game, and protecting consumers and individuals placing bets.

During an Aug. 24 update on the Senate floor, Sen. Orrin G. Hatch (R-Utah) said progress is being made, and that he would release a legislative proposal “in the coming weeks.” There is currently a 0.25 percent federal excise tax on all betting handles.

By: Adam Schuster in the St. Clair Record

Illinoisans should prepare to pay more for online purchases from out-of-state retailers.

The U.S. Supreme Court’s recent decision in South Dakota v. Wayfair Inc. is projected to increase revenue to the Illinois state budget by $140 million this year. As a result of the decision, and a change in Illinois law passed with this year’s budget bill, most out-of-state retailers who sell to Illinois customers will be required to collect and remit a “use tax” of 6.25 percent on all online transactions starting Oct. 1.

Technically, Illinoisans are already required to pay the use tax – an alternative to the sales tax paid on transactions at brick-and-mortar retailers – on online transactions. However, not many do. And under Supreme Court precedent established in 1992 in Quill Corp. v. North Dakota, only businesses with a physical presence in the state were required to collect sales taxes for online purchases.

Therefore, in practice, many online purchases from out-of-state retailers were free from state taxation. Proponents of the Wayfair decision believe that Quill created an unfair advantage for online retailers over brick-and-mortar stores.

The Illinois General Assembly changed the requirements under which companies must collect and remit the use tax in the fiscal year 2019 budget implementation bill. Anticipating the outcome of Wayfair, Illinois’ requirements now mirror those of South Dakota. All businesses with over $100,000 of online sales in Illinois, or at least 200 discrete transactions, are required to collect the tax on all purchases.

The new rules take effect Oct. 1. The Illinois Department of Revenue estimates the stricter collections requirements will generate an additional $200 million in sales tax collections annually. Because the rules are not in effect for all of fiscal year 2019 – which goes from July 1, 2018, to June 30, 2019 – the estimate for the first year of collections is $140 million.

However, some uncertainty around this new tax remains.

A bill introduced in the U.S Congress by Wisconsin Republican Jim Sensenbrenner would delay implementation until Jan. 1, 2019, and would also restrict the businesses subject to collection requirements to those that generate more than $10 million in annual U.S. e-commerce sales. Both changes would likely reduce the amount of revenue Illinois could raise this year.

New federal restrictions on states’ collection of online sales taxes would put another hole in Illinois’ fiscal year 2019 budget, which is already as much as $1.5 billion out of balance due to its reliance on budget gimmicks and structural overspending.

Sensenbrenner’s bill, which is co-sponsored by two Democrats, according to Reuters, also calls on states to create interstate agreements that simplify sales tax collections for out-of-state online retailers.

South Dakota’s participation in the Streamlined Sales and Use Tax Agreement, or SSUTA, was cited as a positive factor by the Supreme Court in Wayfair. The SSUTA, which currently has 23 full member states, simplifies online sales tax collections by creating uniform rules and processes for compliance. Illinois is not a member.

While the exact timing and scope of the change remains somewhat uncertain, one thing is clear: Illinoisans will soon be paying taxes on more online purchases. Unfortunately, the Illinois General Assembly has already planned to spend this money rather than using it to pay down debt or repeal other harmful taxes.

By: Ryan Prete of Bloomberg Tax

A National Football League official, an American Gaming Association official, and an official from the Sheldon Adelson-backed Coalition to Stop Online Gaming. Witnesses from all sides of the argument are set to discuss sports betting implications on Capitol Hill.

The House Judiciary Subcommittee on Crime, Terrorism, Homeland Security, and Investigations has released the witness list for its Sept. 27 hearing titled “Post-PASPA: An Examination of Sports Betting in America.” The scheduled witnesses are:

  • Jocelyn Moore, executive vice president of communications and public affairs at the NFL;
  • Sarah Slane, senior vice president of public affairs at the American Gaming Association;
  • Becky Harris, chair of the Nevada Gaming Control Board;
  • Jon Bruning, counselor at the Coalition to Stop Internet Gambling (CSIG); and
  • John Warren Kindt, professor at the University of Illinois.

A spokesperson for Rep. Jim Sensenbrenner (R-Wis.), who chairs the subcommittee, told Bloomberg Tax Sept. 24 that the chairman “looks forward to hearing from these witnesses who represent a wide variety of positions on sports betting.”

This is the first federal hearing on sports betting since the U.S. Supreme Court cleared the way for states to allow bets on sports in its May ruling in Murphy v. NCAA,which repealed the federal Professional and Amateur Sports Protection Act of 1992 (PASPA). That law had prohibited states from “authorizing” gambling related to professional and amateur sports leagues.

The hearing also follows week three of the NFL season, a time of fervent betting. In a Sept. 5 report, the American Gaming Association, in conjunction with the Nielsen Sports research company, estimated the NFL’s annual revenue could increase by $2.3 billion a year—a 13 percent revenue increase—due to widely available, legal sports betting.

Witness to Squabble?

Dustin Gouker, managing editor at Legal Sports Report—a sports betting-centric online news source—told Bloomberg Tax that other than likely arguing between the AGA’s Slane and Kindt and the CSIG’s Bruning, he doesn’t anticipate an argumentative atmosphere at the hearing.

Gouker said in an email that he’s “not sure how invested/knowledgeable any of the members of this subcommittee are on the subject. I am not expecting much at all from it.”

Adelson—chairman and majority shareholder of Las Vegas Sands, the world’s largest casino operator—will be represented at the hearing. He has spent more than $200 million in the past few years championing Republican candidates and conservative causes.

“The CSIG is generally known to be bankrolled by Sheldon Adelson, who is just about the only sector of the gaming industry wholeheartedly opposed to online gaming,” Gouker said, adding that Adelson’s Las Vegas properties do offer online wagering.

Growing Federal Concerns

The hearing follows recent calls for federal intervention from Senate leadership.

On Aug. 29, Senate Minority Leader Charles E. Schumer (D-N.Y.) proposed a “desperately needed” federal sports betting framework, a move that state tax policy experts say could hurt state sovereignty and tax revenue pursuits.

Schumer also published a memo that included three principles he deems necessary in a framework: protecting young people and those suffering from gambling addiction, protecting the integrity of the game, and protecting consumers and individuals placing bets.

During an Aug. 24 update on the Senate floor, Sen. Orrin G. Hatch (R-Utah) said progress is being made, and that he would release a legislative proposal “in the coming weeks.” There is currently a 0.25 percent federal excise tax on all betting handles.

By: Ryan Lessard of the New Hampshire Union Leader

PITTSFIELD — A small business that uses software to broker rare coin and stamp sales on eBay is worried the U.S. Supreme Court ruling in South Dakota v. Wayfair may put him out of business if Congress doesn’t pass a fix.

Joe Cortese, the owner of NobleSpirit in Pittsfield, is worried. Since the Supreme Court’s Wayfair decision, which requires sellers to collect and pay out-of-state sales tax when the buyer is in a tax district with a sales tax, he said he is potentially liable to pay sales taxes in more than 10,000 tax districts across the country, which is too much for him to handle. 

And he said the decision could overturn one of the biggest advantages of doing business in New Hampshire; the absence of a broad-based sales tax.

“I would love to know what’s going to happen to New Hampshire and our tax-free status,” Cortese said.

He said his business makes about $3 million each year, which he said places him within the traditional definition of small business, defined by revenues under $5 million.

While many of the specific ways this decision could affect his business remains unclear, Cortese said one thing is certain; he can’t make software smart enough to account for the ever-shifting tax rates and product definitions of 10,000 different jurisdictions. 

“It’s a physical, literal impossibility,” he said.

But his company is too small to hire a sizeable accounting department with the staff needed to ensure NobleSpirit complies with all the varied tax laws, he says — such an expense would likely put the company at a net revenue loss. 

“This is the fundamental reason why this is such a problem for small businesses,” Cortese said. “Just the fear of audit is enough to scare people out of business.” 

He said he is “absolutely” at risk of going out of business if there are no legislative solutions designed to protect small businesses like his. And he doesn’t think he’s alone.

Cortese has an apocalyptic vision of the American economy imploding into another recession or depression if small businesses are required to incur unreasonable costs required to comply with the new ruling.

That’s because a majority of employer businesses are small businesses with fewer than 500 employees. 

NobleSpirit is not only a seller of rare coins, stamps and other collectibles, it also makes a software program called Meridian which automates and streamlines the process of posting products on eBay, capturing consumer data, completing the sales and shipping. 

As a result, Cortese said he would be responsible for not only collecting the taxes from his own sales, but those of thousands of other subscribers who use his software.

He’s been in business since 1998 and created the first Meridian program in 2002. Cortese said they had about 4,000 subscribers to that program. They are currently in the process of redesigning and modernizing the platform, which will be ready for release soon.

On top of the technical burdens of the new requirements, Cortese also has a philosophical problem with paying taxes in a jurisdiction where his company has no physical presence and, therefore, no say in how the tax dollars are spent. It’s taxation without representation, he said. 

Cortese supports a bipartisan bill in Congress authored by Rep. Jim Sensenbrenner (R-Wis.) that would provide some clarity and prohibit states from requiring sales taxes from companies that make less than $10 million in annual sales.

But even if that passes, he said it would discourage companies from growing past that $10 million mark, which he said is bad for him and bad for the country.

By: The Wisconsin State Journal

Wisconsin stands to benefit from the 2018 farm bill now before Congress. That’s why it’s important for the committee hashing out differences between the House and Senate versions to produce a compromise by the Sept. 30 deadline.

While the committee can keep negotiating beyond the deadline by extending the current farm bill, more time is not what Congress needs to resolve the disputes. Instead, the key to unlocking an agreement is for Congress to appreciate what the 19th-century master politician Otto von Bismarck so well understood: “Politics is the art of the possible, the attainable — the art of the next best.”

The farm bill is possible and attainable before the end of this month if Republicans and Democrats stop holding out for what’s best for their partisan goals and aim instead for the next best solution, which will serve the country’s interests. That’s the art of compromise that has been missing from Washington, D.C., for so long.

Holding up passage of the $420 billion farm bill is a dispute over the Supplemental Nutrition Assistance Program, formerly known as the food stamp program, which accounts for 80 percent of the spending. The House version cuts SNAP by tightening eligibility and imposing work requirements on more recipients. The Senate version leaves SNAP intact.

The House version is expected to kick 76,000 Wisconsin residents off food stamps, including 23,000 children. That’s about 11 percent of the state’s total food-stamp recipients.

Reducing fraud and encouraging work are important. But so is feeding families in need. The congressional negotiators’ job is to find a middle ground. They should do their jobs. Failure puts American agriculture at risk.

The farm bill comes up for debate every five years. Wisconsin entered this debate cycle with a need for improvement in the bill’s provisions affecting the dairy industry. Agriculture contributes about $88 billion a year to Wisconsin’s economy and provides about 12 percent of Wisconsin’s jobs. About half the economic contribution comes from the dairy industry. Wisconsin, America’s Dairyland, is the top cheese-producing state and is home to more dairy farmers than any other state.

The dairy provision in the current farm bill, the Margin Protection Program, was a disappointment. Based on an insurance system in which farmers paid premiums to get taxpayer-subsidized insurance to protect against losses, the system proved to be a money-loser.

The Senate and House versions of the new dairy insurance program are slightly different, but both offer a stronger safety net. A University of Missouri professor concluded the new program could offer six times the benefits of the old program, depending on the size of a farm and the choice of coverage.

For taxpayers, the new insurance program should be more cost-effective. The current bill’s dairy program has a budget baseline of about $50 million a year. The new program should cost taxpayers about $100 million more over five years. For that extra expense, consumers should gain more stability in dairy product prices and supplies.

The farm bill makes other improvements important to Wisconsin, including legalizing the production of industrial hemp, in which the state once led the nation.

The bill also falls short in many areas. For example, though Wisconsin congressmen Ron Kind and Jim Sensenbrenner helped lead efforts to cap payments to wealthy farmers, the bill does almost nothing to rein in such unnecessary subsidies. But no farm bill has been perfect. Congress cannot let partisan perfection be the enemy of the greater good.

For Wisconsin, this bill is better than the expiring farm bill. Pass it.

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: 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.