Expectations Low Congress Will Get to Online Sales Taxes

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By Che Odom

Hopes already are fast eroding that Congress will clear up how states may tax out-of-state online retailers this year.

A legislative staff member of a leading House Republican told Bloomberg BNA March 22 that the busy legislative calendar, which includes GOP-led efforts on a tax overhaul and health care, means chances the issue will be heard this session are very slight.

Jessica Eisenmenger, a state-and-local-tax attorney with Eversheds Sutherland (US) LLP, told a gathering of the District of Columbia Bar that representatives in Congress seem to have an idea of what they think is best when it concerns taxing remote retailers.

“Nobody is going to give in to anybody else,” she said March 22. “Whenever we end up with something, if we end up with something, it is going to be one big mesh of all these different ideas.”

Spokespersons for three lawmakers working on their versions of digital sale tax bills didn’t immediately return calls for comment.

Ryan Seeks Coalition

Earlier this session House Speaker Paul D. Ryan (R-Wis.) met with staffers of key sponsors of remote sales tax legislation to try and promote a consensus behind any one. Those were:

  •  Rep. Jason Chaffetz (R-Utah), sponsor of the Remote Transactions Parity Act (RTPA) (H.R. 2775);
  •  Rep. Steve Womack (R-Ark.), House sponsor of the 2013 Marketplace Fairness Act (MFA) (S. 698); and
  •  Rep. Robert W. Goodlatte (R-Va.), sponsor of the Online Sales Simplification Act (OSSA) (discussion draft).

The thinking then was that the House may be working on a bill this term, the staff member said.

Targeting Supreme Court Case

Limits on the ability of states to tax retailers that have no physical presence within their borders may be first addressed at the federal level through a legal challenge by states, Shirley Sicilian, national director of State and Local Tax Controversy in KPMG LLP’s Washington National Tax office, told attendees of the D.C. Bar event in Washington.

“The activity we are seeing in the states is aimed at getting to the Supreme Court,” she said.

Several states have adopted “economic nexus” regimes that require retailers meeting a specified monetary threshold or volume of in-state sales to collect and remit sales tax. South Dakota and Alabama are already embroiled in litigation that state officials welcomed, aspiring to reach the Supreme Court and overturn a 25-year-old constraint on sales tax collection.

The ruling in that case, Quill Corp. v. North Dakota, 504 U.S. 298 (1992), forbids states from imposing sales and use tax collection obligations on sellers without a physical presence in-state.

South Dakota’s lawsuit is the furthest along, with an appeal to the state supreme court expected within weeks.

To contact the reporter on this story: Che Odom in Washington at COdom@bna.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

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