We have written previously about attempts by Congress to overturn the physical presence nexus standard of Quill Corp. v. North Dakota via the Main Street Fairness Act, the Marketplace Fairness Act, and the Marketplace Equity Act. The bills vary in their specifics as we discuss here and here, but most simply put, all three bills would permit states to require remote sellers to collect and remit sales and use tax despite such sellers having no physical presence in the state. While it is difficult to predict what Congress may do in an election year, it appears that so far, the Main Street Fairness Act has not made much progress through Congress since being introduced. The other two bills have seen some committee action lately, however, as discussed below.
Meanwhile, a coalition has formed to help protect remote sellers’ interests. The TrueSimplification of Taxation (“TruST”) Coalition was formed jointly by the Direct Marketing Association, the American Catalog Mailers Association, the Electronic Retailing Association, and NetChoice to represent “American businesses in the fight to keep interstate commerce and competition free from unfair tax burdens imposed by states where our businesses have no operations or representation.” Brann & Isaacson partners George Isaacsonand Martin Eisenstein assisted in forming the coalition and provide ongoing advice regarding the sales and use tax collection implications to remote sellers.
On July 24, 2012, the House Committee on the Judiciary held a hearing on The Marketplace Equity Act. At the hearing, the bill’s sponsors, and three others (the governor of Tennessee, a representative of the Streamlined Sales Tax Governing Board, and a visiting fellow at the Hudson Institute, a public policy think tank) all spoke in favor of the bill. On the other side, a representative from the Tax Foundation and Steve DelBianco, the executive director of NetChoice, one of the TruST Coalition members, defended the Quill standard as vital to the protection of online sellers – and in particular small Internet retailers -- in the absence of true simplification of state sales and use tax systems.
On Wednesday, August 1, 2012, at a hearing before the Senate’s Committee on Commerce, Science, & Transportation regarding the Marketplace Fairness Act, the committee heard a group of proponents testify, and Mr. DelBianco spoke on behalf of remote sellers and against the bill. However, one of the witnesses inadvertently helped make Mr. DelBianco’s case: the witness, a bookstore owner from Texas who voluntarily collects sales tax on remote sales, was found to be charging tax at the wrong rates on his remote sales, thus demonstrating just how complex remote collection can be. Perhaps through this testimony some Senators will begin to understand the challenges of nationwide use tax collection, but many may require additional education from their constituents who do business online.
Our readers should note, as well, that the July 31 deadline set by the California legislature for adoption of federal legislation overturning Quill has passed. This means that, barring any additional state legislation, California’s affiliate nexus provisions are back in play beginning September 15, 2012. We will continue to monitor each bill’s progress and keep our readers posted of developments in this area.
