Update: California Senate Moves Tax Bill to Inactive File

As we’ve written previously (here, here, and here), the California legislature has been considering legislation that may impose potentially unconstitutional requirements on out-of-state retailers selling to California customers.

On May 6, the State Assembly passed AB 2078, Colorado-style legislation that would require out-of-state retailers to provide notice to California customers via the retailers' websites and in their catalogues of the customers’ potential use tax obligations. Previous versions of the Assembly Bill had required such retailers to file quarterly reports with the names, addresses and amounts purchased by California customers, and also created a rebuttable presumption that for any controlled group of corporations, if one member was engaged in business in California, all members would be deemed to be engaged in business in California. As passed by the Assembly, however, only the Bill’s provisions requiring that notice of use tax obligations be provided to California customers survived.

The State Senate has since taken up consideration of the Bill and made its own amendments. In the Bill currently before the Senate, the presumptions regarding controlled groups were reinserted, and the notice provisions were kept in. The Senate did not reinsert the reporting requirements of the original Assembly Bill.

However, the State Senate has yet to vote on the Bill. Instead, yesterday, the Senate moved the Bill to the Senate’s inactive file on a motion by one of the State Senators, likely because today marks the last day on the Senate calendar for any bill to be passed before the Senate’s final recess begins. Although the Bill may be moved off the inactive file, it appears that the California Senate will not be voting on it any time soon. In the meantime, we’ll continue tracking any action on the Bill and keep you posted of developments as they arise.

UPDATE, Jul. 5, 2011: California has enacted a new nexus law. 

California Reinserts Reporting Requirements; Tennessee’s Proposal to Expand Nexus Dies in Committee

We’ve been tracking developments in affiliate nexus legislation and attempts to impose Colorado-style reporting requirements on vendors in other states. Since our last updates (here and here), there have been further developments of note:

California

On May 14, we wrote that the California Assembly nixed proposed affiliate nexus legislation and Colorado-style reporting requirements before passing its bill onto the State’s Senate.  As in the Assembly’s version, the current iteration of the bill provides that retailers not required to collect use tax provide readily visible notice on their websites and catalogues that use tax is due from the purchaser.  Last week, however, the California Senate amended the bill to reinsert reporting requirements.

Under the amended bill, the “[State Board of Equalization] may require the filing of reports” by any person having possession or custody of information relating to sales of tangible personal property (“TPP”) subject to the tax. § 7055(a) (as proposed) (emphasis added). It is unclear to whom, exactly, this possible reporting requirement applies, but the reports “shall be filed when the board requires” and must include names and addresses of purchasers of TPP, the sales price of the TPP, the date of the sale and “such other information as the board may require.”

Additionally, the proposed subsections (b)(1) and (2) indicate mandatory reporting for vendors not registered to collect sales tax whose sales exceed a relatively modest threshold. The subsections require “every person that is not registered with the board” that sells TPP subject to use tax, to file quarterly reports including names, addresses, sales prices, the dates of sales, and “such other information as the board may require.” Subsection (b)(2) provides that the reporting requirement in (b)(1) does not apply to persons whose receipts are less than $100,000 in the prior year and who are reasonably expected to have receipts less than $100,000 in the current year.

It is unclear whether the Senate’s version will survive the legislative process.  If the amended bill is passed by the Senate, it must go back before the Assembly for agreement on the amendments. If the Assembly does not agree with the Senate’s amendments, it will be referred to a conference committee formed of members of both houses to resolve any differences.

We will continue tracking the progress of the bill to keep you informed of any new reporting requirements that may be imposed by the State. We also reiterate our previously-stated concerns: that the proposed bill imposes even more onerous reporting obligations than the Colorado statute, and that it may encourage other states to follow suit in attempts to regulate interstate commerce.

Tennessee

We last wrote about Tennessee in April, noting that the State’s affiliate nexus bill had been recommended for passage, but that the State’s Department of Revenue had indicated that it did not believe a mere affiliate relationship would be adequate for a finding of nexus.  The legislation has since died in committee, when the General Assembly adjourned on June 10. Only time will tell whether Tennessee intends to make a second run at imposing affiliate nexus rules on out-of-state vendors.

UPDATE, Aug. 31, 2010:  Please see our most recent post concerning the status of the California Bill here.

UPDATE, Jul. 5, 2011: California has enacted a new nexus law.

California Nixes Affiliate Nexus Legislation; Connecticut’s Attempts Stall

Since our last update on the status of various legislative attempts to introduce Amazon-style affiliate nexus across the country, there have been a few important developments:

California

In the most current iteration of its bill, passed by the State Assembly on May 6, California scrapped proposed affiliate nexus and Colorado-style notice requirements (discussed here by us last month), and instead merely requires out-of-state retailers to provide notice on their websites and in their catalogues that California customers are required to remit use tax.  In the bill analysis provided by the Assembly’s Revenue and Taxation Committee, the Committee rightly noted that under Quill, California is constitutionally prohibited from collecting sales tax from out-of-state retailers with no physical presence in the State.  The Committee also noted that the bill provides no repercussions for non-compliant retailers.  The bill is now before the State Senate.

Connecticut

In Connecticut, the last action taken on H.B. No. 5481, the proposed affiliate nexus legislation, was on April 13.  The 2010 regular session of the State’s legislature adjourned on May 5 without holding any vote on the bill, and it appears that no affiliate nexus legislation will be enacted in the near future.


UPDATE, Aug. 31, 2010:  Please see our most recent post concerning the status of this California Bill here.

UPDATE, Jul. 5, 2011: California has enacted a new nexus law.

California Follows Colorado Down the Rabbit Hole

As we wrote last month, Colorado recently enacted legislation requiring retailers that do not collect Colorado sales tax to provide a list of their Colorado customers and the amount of Colorado purchases to the State Department of Revenue on an annual basis. Retailers must also inform purchasers of their duty to remit use tax and provide purchasers an annual statement of their purchases.

In that entry, Matt Schaefer wrote, “Voters in other states beware.” In fact, just days before Colorado’s bill was signed into law, the California Assembly introduced its own, similar legislation: AB 2078, as amended April 5, 2010. The bill is currently before the Assembly’s Committee on Revenue and Taxation. If passed in its current form, California would institute Colorado-type reporting requirements which, like Colorado’s law, are potentially in violation of Quill, discriminate against interstate commerce, and certainly invade consumers’ privacy.

The California rules are quite similar to Colorado’s, but the proposed California law requires quarterly, instead of annual, reports and provides an exemption based on sales volume. The bill provides that:

• Any retailer making sales subject to tax, that is not required to collect use tax, “shall provide notification on its Internet Web site or retail catalogue that tax is imposed…and is required to be paid by the purchaser.” Cal. Rev. & Tax Code § 6208(2) (as proposed).

• Such retailers must file on a quarterly basis “a report that sets forth the names and addresses of purchasers of tangible personal property, the sales price of the property, the date of the sale, and such other information as the board may require.” This requirement does not apply to retailers with qualified receipts of less than $100,000 in the prior year if the retailer’s qualified receipts are “reasonably expected” to be less than $100,000 in the current year, as well. Cal. Rev & Tax Code §§ 7055(7)(b)(1), (2) (as proposed).

Also similar to Colorado’s law, AB 2078 creates a rebuttable presumption that if a “controlled group of corporations has a component member that is a retailer engaged in business in [California],…[any retailer that is a part of the controlled group] shall be presumed to be a retailer engaged in business in” California. Cal. Rev. & Tax Code § 6203(1)(f) (as proposed). The bill does not provide any information about how a retailer can rebut this presumption.

Obviously, although similar in nature to Colorado’s law, the California bill potentially imposes even more onerous reporting obligations for out-of-state retailers, based on the sheer number of customers located in California and the quarterly filing requirements. Retailers also should be concerned about a legislation domino-effect. As we wrote previously, South Dakota is already informally demanding that out-of-state companies provide the State a list of in-state purchasers who may owe use tax. Which states will be next to attempt to regulate interstate commerce?

UPDATE, Aug. 31, 2010:  Please see our most recent post concerning the status of the California Bill here.

UPDATE, Jul. 5, 2011: California has enacted a new nexus law.