Establishing Fairness for Main Street
Now that the Supreme Court has overturned the “physical presence” test for remote sales tax collection requirements, cities need to make sure that they have a seat at the table and are working with state legislatures to ensure methods for the collection and remittance of local sales taxes are included in these discussions.
This is about fairness: For years, certain remote retailers could avoid collecting sales taxes and sell products at effectively lower prices than their brick-and-mortar counterparts along Main Street. The South Dakota v. Wayfair decision is NOT a new tax or an “Internet Tax.” Rather it is a move toward ensuring that already owed taxes are collected and that everyone plays by the same rules.
Remote retailers enjoy the same services as physical ones: The “physical presence” test arbitrarily allowed certain remote retailers to avoid having to collect sales taxes that fund the locally-owned roads, ports and municipal services that remote retailers rely on to deliver packages.
Simplification efforts: Cities and states continue to make sure collection processes are fair, efficient and transparent. As states continue to respond to the decision, discussions must include processes for the collection and remittance of local option sales taxes in a way that is fair for everyone: states, counties, cities and retailers.
Not a burden on business: Simplification efforts, technological improvements and collection software make the collection and remittance process fair and sensible in today’s world of growing e-commerce.
The Streamlined Sales and Use Tax Agreement (SSUTA) is a multistate agreement that was designed to simplify and modernize sales and use tax administration, in order to reduce the burden of sales tax compliance and ensure that the processes are fair for retailers, states, counties, cities and everyone else involved.
Elements of SSUTA:
- Specifically mentioned in the South Dakota v. Wayfair majority opinion as a means of alleviating any burdens to interstate commerce.
- Includes methods for the collection and remittance of local sales taxes.
- Destination-based sourcing of sales taxes.
- Single point of registration for retailers.
- Centralized administration of sales tax collections within each state.
- Single database for all rates and jurisdictions within a state.
Remote Transactions Parity Act (RTPA) of 2017 and Marketplace Fairness Act (MFA) of 2017: House and Senate companion bills. Would steer states into joining SSUTA or adopting similar simplification efforts, if the state intends to impose sales tax collection requirements on remote retailers. Both bills contain small seller exemptions that would exempt sellers below certain thresholds from complying. MFA = $1 million in sales within a year / RTPA = $10 million in sales in the first year, $5 million in sales in the second year, and $1 million in sales in the third year.
Online Sales Tax Simplification Act (OSSA): Although never formally introduced, the bill would establish origin-based sourcing scheme for the collection of remote sales, whereby the rate, collection and remittance of sales taxes from a transaction would be directed by the state from which the retailer is shipping. NLC opposes.
No Regulation Without Representation Act of 2017: Prohibits states and local governments from regulating or imposing sales tax collection requirements on entities that do not have a physical presence within the state. NLC opposes.
Stop Taxing Our Potential (STOP) Act of 2018: Essentially rolls back the ruling from South Dakota v. Wayfair by codifying the “physical presence” test into law. NLC opposes.