Legislative update: Online sales tax bill introduced in the House

Online sales tax bill introduced in the House

Rep. Jason Chaffetz (R-UT) introduced H.R. 2775, the Remote Transactions Parity Act (RTPA)—a bill that would authorize the states to require online sellers to collect and remit state and local sales and use taxes on remote transactions under certain conditions.

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The RTPA is based, in large part, on previous versions of other proposed legislation, the Marketplace Fairness Act (MFA), but with modifications. In general, the RTPA would authorize states to require remote sellers not qualifying for a “small seller exception” to collect tax on goods and services sold into the state if:

  • The state is a member of the Streamlined Sales and Use Tax Agreement; or
  • The state adopts certain simplifications to its state and local sales tax system including, among other things, collection of all local taxes by a single entity and a common tax base for all state and local sales taxes within a state.

Differences from earlier proposals

The RTPA reflects changes to previous iterations of the MFA including:

  • The RTPA would provide audit protection for small businesses by providing that, except in instances of intentional misrepresentation or fraud, states may not audit a remote seller that has less than $5 million in gross receipts and may not use contingent fee auditors with respect to remote sellers.
  • The RTPA would modify the MFA’s “small seller exception.” While the MFA would limited the exception to only businesses with less than $1 million in remote sales, the RTPA would exclude small businesses under $10 million in the first year after the effective date, phasing to $5 million in the second year and $1 million in the third. In the fourth and subsequent years, there would be no small seller exception. Under the RTPA, a remote seller using an electronic marketplace for the marketing of its goods and services would not qualify for the small seller exception.
  • The RTPA would not become effective until—and no state could require a remote seller to collect tax earlier than—the date that is one year after the date of enactment, provided that if that date falls between October 1 and December 31, the effective date would be January 1 of the immediately following year.
  • The RTPA would require states to provide remote sellers with “free access” to all national “certified software providers” that a remote seller could use to handle its sales tax determination, collection, remittance, and compliance responsibilities. The term “free access” would be defined to include installation, setup, and maintenance of the service provider’s automated system into the remote seller’s system.

What’s next?

The RTPA currently has 16 co-sponsors and has been referred to the House Judiciary Committee. No further action on the legislation has been scheduled in the House.

In the Senate, Senator Enzi of Wyoming introduced another version of the MFA (S.698) in March 2015. That bill has 22 co-sponsors at this point.

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