South Dakota v. Wayfair (“Wayfair”) has made sales tax collection on remote sellers a widely discussed topic. Although the case has been decided, many are still waiting to see what actions each individual state will take on the collection of sales tax under Wayfair. Some states have already enacted economic nexus laws, and many more will follow. States may even try to retroactively tax remote sellers. The proposed Online Sales Simplicity and Small Business Relief Act of 2018 is currently being debated in Congress, and would halt retroactive sales tax collection.
Proposed Legislation – The Online Sales Simplicity and Small Business Relief Act of 2018
The Online Sales Simplicity and Small Business Relief Act of 2018 would put a ban on retroactive taxation of remote sellers. The proposed legislation would make it illegal for states to impose a sales tax collection duty on a remote seller for any sale that occurred prior to June 21, 2018. In addition, there would be a phase-in of compliance obligations. Under the Act, states would only be able to impose a sales tax collection duty on sales that occur after January 1, 2019.
The Act also includes a “Small Business Remote Seller Exemption”. To qualify as a small business remote seller, the seller would have no more than $10,000,000 in gross annual receipts in the United States during the preceding calendar year. Under the exemption, states would not be able to impose sales tax on any person other than the purchaser, if the sale is made on or after June 21, 2018, and before the date that is 30 days after states develop and Congress approves an interstate compact governing the imposition of tax collection duties on remote sellers.
As referenced above, Congress requests states to develop an interstate compact for the collection of sales tax by remote sellers. The interstate compact would identify a clearly defined minimum substantial nexus, simplify standards for state registration, collection, remittance, auditing, and other compliance processes to reduce any undue burden on interstate commerce.
Possible Implications of the Act
It is believed that the Online Sales Simplicity and Small Business Relief Act of 2018 will be difficult to pass as it is currently presented. If the Act does pass, states will not be allowed to impose tax collection duties on remote sellers on a retroactive basis. The ban on retroactive sales tax collection would save online retailers from having to pay uncollected taxes while providing time and opportunity for retailers to comply with the applicable state statutes that have stemmed from the Wayfair case. To discuss how the South Dakota v. Wayfair case and new state and local tax regulations will impact you, contact an Anders advisor.
