A few quick updates on some of the still pending Internet sales tax legislation as well as a few comments on states with existing Internet sales tax laws and some general thoughts. While several other states are on the watch list, Connecticut, Florida, California and Tennessee are four states with more active pending legislation. Legislation is also pending in Illinois.
In Connecticut, HB 5481 is still awaiting vote of the House. As you recall. it received favorable report from the Joint Finance Committee and is slated for a vote. This bill has strong support and legislators have heard from many on all sides of the issues. The bill sets a sales threshold; once met nexus is established and remote merchants must collect sales tax. The bill indicates that the presumption of nexus may be rebutted.
Florida continues their work on the iSTART legislation. Their bill seeks to automate the process a bit reducing the burden on merchants. The Florida bills are currently being reviewed in Policy Committee.
California (AB 2078) and Tennessee are both considering legislation similar to what passed in Colorado (HB 1193). If passed, these bills require out of state merchants who do not collect sales tax to advise customers that a sales and use tax is due on their purchases. Merchants are required to advise customers of their obligation on their invoice and provide a summary at years end. A report is also filed with the revenue department, These types of bills seek to encourage remote merchants to collect sales tax because it is actually more work to not collect the sales tax at time of purchase.
In Illinois, SB3353 is still sitting in Assignments where it may or may not be referred back to the Revenue Committee this year.
In response to North Carolina’s demand for records from Amazon on North Carolina customers’ purchases for the last several years, Amazon has filed a suit against North Carolina. North Carolina and Rhode Island both passed Internet sales tax legislation in 2009.
In New York, we are still awaiting the decision on Amazon’s appeal of the court’s decision to uphold the NY Internet sales tax law passed in 2008. Decision has been expected for several weeks. The common opinion is that the courts will rule in favor of New York and that Amazon will again appeal. Amazon currently collects sales tax for New York.
New York has had an Internet sales tax for two full years, both affiliates and merchants have survived. Merchants adapted by starting to collect the sales tax, some using a service such as Avalara to simplify the process. Many merchants are not affected by the law as they do not come close to the sales threshold of $10,000 in previous 4 quarters (sales from NY affiliates to NY residents).
As we have seen, as states struggle to deal with decreased revenue they look for ways to improve collection of sales tax. Many states are looking to enact improved Internet sales tax legislation and it is quite likely that next year will see even more variations. It is up to our industry to adapt.