House Bill Would Clarify Online Sales Tax Requirements

Chris Gaetano
Published Date:
Sep 18, 2018

A recently introduced House bill would, if implemented, prevent state governments from collecting sales tax from most out-of-state sellers until such a time as a compact regarding treatment of online sales is developed by the states and approved by Congress. The bill says that "it is the sense of Congress that the States should develop an interstate compact for the collection of sales tax by remote sellers that identify a clearly defined minimum substantial nexus between the remote seller and the taxing State, that simplifies registration, collection, remittance, auditing and other compliance processes to the greatest extent possible." This exemption would specifically apply to smaller remote sellers, which are defined as those with gross receipts in the U.S. of no more than $10 million.  

The bill, the Online Sales Simplicity and Small Business Relief Act of 2018, is sponsored by Rep. Jim Sensenbrenner (R-Wis.) and was drafted in response to the recent Supreme Court decision ruling that states have the right to levy sales tax on out-of-state sellers, even if there is no physical presence in those states. NYSSCPA members noted that the decision, South Dakota vs. Wayfair, Inc., could present a compliance challenge for Internet retailers, as they will need to know the tax rules of every single taxing jurisdiction where they might conceivably have customers, and go through a registration process in many of them. 

Beyond the small business exemption, the bill would also prevent state governments from imposing any sort of retroactive taxation, and from collecting sales taxes before Jan. 1, 2019. 

“This bipartisan legislation reins in the taxation free-for-all created by the Supreme Court’s ruling in Wayfair," said Rep. Sensenbrenner." Online sellers need clarity and stability in the sales tax arena. Our bill will protect small businesses and Internet entrepreneurs from excessive regulatory burdens. Throughout the Fifth Congressional District, I continually hear from businesses that they need ‘certainty.’ This bill provides that." 

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