Federal and State Internet Sales Taxes

Six months ago Michigan Governor Snyder signed into law the “Main Street Fairness Act.” Beginning on October 1, 2015 online retailers in the state must collect and remit 6 percent sales tax just as retailers with a physical presence do.

Source: Detroit Free Press.

PC World reported on November 14, 2014 that Speaker John Boehner opposed the Act and would bring no action on it before the end of last year’s Congressional session. The Senate passed an internet sales tax under the “Marketplace Fairness Act” in 2013 but House Republicans blocked its passage.

This year on June 15, 2015, however, Utah Republican Congressman Jason Chaffetz introduced a new version as “The Remote Transactions Parity Act.” His bill provides that:

  • States would have to provide the software to sellers that have no physical presence so they can calculate taxes owed on purchases made by residents of other states;
  • Small businesses with sales under $10 million would be exempt in the first year; businesses with sales under $5 million would be exempt in the second year; and those with sales under $1 million would be exempt in the third year.
  • No businesses exempt after the third year, but those with less than $5 million sales do not have to be audited for compliance with the tax requirements.

The Heritage Foundation points out that small businesses would have to bear a heavy burden to collect and account for sales taxes from more than 10,000 jurisdictions. Additionally, in 1992 the Supreme Court ruled in Quill vs. North Dakota that states can only tax businesses with a physical presence within their boundaries (http://dailysignal.com/2015/06/23/whats- wrong-with-the-latest-internet-sales-tax-bill/).

According to the Daily Signal, large online retailers such as Overstock and Amazon support Chaffetz’s bill as a means to establish a federal standard. Those who support the imposition of internet sales taxes claim it is necessary to keep the tax rules fair for local and remote businesses.

H.R. 2775 was assigned to the House Judiciary Committee, and on July 1, 2015 went to the Subcommittee on Regulatory Reform, Commercial and Antitrust Law. The bill has 18 Republican sponsors and 15 Democrat sponsors. Request alerts on the status of the bill here.

Although sponsors from the federal level do not include any from Missouri, on the state level Warren Love (R-Mo.) expressed his support for an internet sales tax when he stopped by the old Chamber of Commerce building in Warsaw last October. At the time, he referred to it as an untapped source of revenue for Missouri, and asked Congresswoman Hartzler who was meeting with the Chamber Board members that afternoon to consider supporting internet sales tax legislation if and when it were introduced.

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