Call for sales tax simplification
- August 3, 2018 | Gail Cole
The ecommerce association NetChoice wants sales tax compliance for businesses to be simpler. As a founding member of the coalition for True Simplification of Taxation (TruST), this hardly comes as a surprise. But its calls for simplification have grown louder since the Supreme Court of the United States ruled that states can require out-of-state businesses to collect and remit sales tax. Prior to the court’s ruling in South Dakota v. Wayfair, Inc., a state could impose a tax collection obligation only on businesses with a physical presence in the state.
On July 24, the House Judiciary Committee met to discuss the ramifications of the Wayfair decision. NetChoice was not among the witnesses. Nonetheless, the organization’s president Steve DelBianco submitted an 11-page statement to the hearing’s written record. It suggests Congress “use its constitutional authority to protect interstate commerce by restoring the physical presence rule.”
Should Congress allow the taxation of remote sales to persist, NetChoice asks Congress to allow states to impose sales tax on remote businesses — “but only if states adopt minimum simplifications stipulated by Congress.”
The proposed “minimum simplifications” measures are:
- A single tax rate for remote sales
- Uniform definitions of taxable products, services, and exemptions
- No caps or thresholds on the taxable value of goods or services
- Uniform definitions of sales price, delivery charges, and other transaction terms
- Uniform rules for refunds, returns, discounts, and coupons
- Uniform return and electronic remittance for, and the establishment of a multistate remittance clearinghouse by 2021
- Uniform rule for rounding and for treatment of bad debts
- Uniform dates and rules for sales tax holidays
- A single Compliant Purchaser Certificate (e.g., for exemptions and resale)
- Single audit on behalf of all participating states at option of seller
- Appeals of assessments through state court system without requiring prior payment of assessed amount
- Voluntary, nonbinding independent mediation of taxpayer protest
- Precise definition of “physical presence”
- Protection from retroactive taxation
- Annual certification by an independent federal agency of state compliance with simplification measures
- No state or local tax authority may impose sales tax, gross receipts tax, or sales reporting obligation on a seller lacking federal statutorily defined “physical presence” except as provided in the federal legislation
- Vendor compensation for sales tax collection and remittance
- Judicial review of claims at the federal district court
- Reasonable small business exception
- Vendor protection from consumer error in computing sales tax (payment by mail order and check)
It’s an impressive list that’s being presented to states as well as Congress. On August 3, representatives from the Federation of Tax Administrators, the Multistate Tax Commission, and the Streamlined Sales and Use Tax Governing Board are meeting with the National Governors Association and the National Conference of State Legislatures to discuss the impact of the Wayfair decision on state tax policy. The proposed simplification measures may come up then.
Like NetChoice, these organizations are seeking more clarity around the Wayfair decision. As yet, there are many unknowns.
Learn about the latest state sales tax policy changes triggered by South Dakota v. Wayfair, Inc. and their potential impact on your business at this Avalara resource page.