The Challenge of Remote Sales Tax Collection
February 1st, 2016 by admin
As all humans know, if ever there were two certainties in life it is death and taxes. One is naturally unavoidable and the other still ultimately holds true as well. Unfortunately, this also applies to the online world as much as it does in the physical world. Sales tax being charged online is still very much a hot topic issue and remains yet to be fully resolved.
This blog post will serve as a recap and an update of where the challenge of collecting sales tax online currently stands.
At the close of 2015, no federal legislation has been formally passed to finally reach a consensus on a method to effectively charge an nationwide federal tax rate for online purchases.
There are, however, three (3) significant bills which have been introduced on the subject of charging and collecting remote sales tax. There have been several attempts and variations to achieve this.
The goal of all this, of course, is to enact legislation so that every online retailer will collect and remit sales tax in every state. However, this is a highly complex and complicated theory as there are literally thousands of different taxing jurisdictions across the county.
The original bill which started it all is the Marketplace Fairness Act (MFA) introduced in 2013. It was ultimately passed by the Senate but never cleared it through the House. You may read more about the Act here.
Basically this act states that each state must charge the appropriate tax for goods and items bought in that state online regardless of where the purchaser resides.
Next is the OSSA (Online Sales Simplification Act). Sounds simple enough right? This Act was similar in nature to the MFA with the main difference of this passage is that it’s based on origin sourcing. This is the idea of any orders would be taxed at the rate of the location from where they are being shipped – not the destination where they are purchased.
In summary the tax would apply based on the rules and rates in the seller’s location (i.e., the origin of the sale).
To fully grasp and understand the 7 Basic Principles on Remote Sales Tax they may be found here.
Third and finally is the RTPA (Remote Transactions Parity Act) from Congressman Jason Chaffetz (R-UT). This piece of legislation is essentially the same OSSA.
This bill is the most recent attempt introduced (06/15/2015).
Over the course of last year, the following states did move forward with through beginning a click-through or nexus (a term defined as when a business entity has established a direct or representational presence within a particular state or jurisdiction) to allow tax collected.
What is to be expected in the upcoming months of 2016? It is widely predicted that lawmakers will continue to bat back and forth until a solution is finally achieved. It is a widely accepted belief that some type of national uniform framework needs to be in place where all states are
To restore States’ sovereign rights to enforce State and local sales and use tax laws, and for other purposes.
In this environment, businesses need to be vigilant. The first step is to understand how MFA – or the lack of it – impacts you. Back in the Hopper: The Marketplace Fairness Act provides key background on pending legislation and advocates getting ahead of changing laws. Automate compliance now to avoid missteps in the future.
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