The U.S. Senate passed the Marketplace Fairness Act of 2013 which provides that states can require remote sellers (online and catalog retailers) to collect and remit sales tax on goods shipped to the consumer's state. Currently, companies only collect and remit sales tax for states where they have a physical presence (commonly referred to as “nexus”). The Act has a small seller exception which exempts businesses that have $1 million or less in gross annual receipts in total remote sales in the United States in the prior calendar year.
Under the legislation, states would only be granted the authority to enforce collection after they have simplified their sales tax laws. Any state which has achieved “Full Member” status of the Streamline Sales and Use Tax Agreement (SSUTA) would automatically have this authority. States that are not full members of the SSUTA would need to enact legislation which meet five simplification mandates. Those mandates are as follows:
- Notify retailers in advance of any rate changes with the state;
- Designate a single state organization to handle sales tax registrations, filings, and audits;
- Establish a uniform sales tax base;
- Use destination sourcing to determine sales tax rates for out-of-state purchases; and
- Provide software and/or services for managing sales tax compliance and hold retailers harmless for any errors resulting from relying on state-provided systems.
While the passage by the Senate is significant, the Act will face a greater challenge making its way through the House. President Obama has announced he would sign the legislation if it passes in the House. Meaden & Moore, Ltd. will continue to keep you updated on further developments in this area. Please contact Leslie Kasten at firstname.lastname@example.org, if you have questions.