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By Tripp Baltz
Online marketplace providers such as Amazon Inc. and eBay Inc. that facilitate sales should be bound by state tax notification and reporting requirements, a Multistate Tax Commission work group said.
In a teleconference meeting May 31, members of the Use Tax Information Reporting Work Group, a subcommittee of the MTC’s Uniformity Committee, said marketplace providers, and not the “underlying seller” in a transaction, should comply with state reporting and notice laws if they facilitate the transaction, process payment, or otherwise provide a “checkout” service.
The work group decided to include such companies in the MTC’s Model Sales and Use Tax Notice and Reporting Statute, which is fashioned after a 2010 Colorado law upheld as constitutional in February 2016 by the U.S. Court of Appeals for the Tenth Circuit in Direct Marketing Association v. Brohl. The U.S. Supreme Court in December denied a petition for review of the appellate decision, clearing the way for Colorado’s notice and reporting law to take effect July 1.
Placing such requirements, and even collection duties, on marketplaces like Amazon and Overstock.com is expected to be the next wave of state tax legislation in this burgeoning area. Minnesota this week became the first state to impose collection duties on electronic marketplace providers. Reporting bills modeled after Colorado’s have bubbled up in a handful of states this year, and Alabama has enacted its version.
The MTC model statute, which was shelved pending the outcome of DMA, requires remote sellers that don’t collect and remit state sales or use taxes to (1) notify buyers at the time of the transaction that tax may be due to the state, (2) provide buyers with an annual report of their purchases, and (3) report information—including total dollar amounts and buyers’ shipping addresses and billing addresses—to the state taxing agency.
After Colorado’s law was upheld, the MTC Uniformity Committee in March formed the work group to begin work on the model statute again before sending it to commission member states for their consideration.
The first question on a list of issues facing the work group was whether to include online marketplace sellers such as Amazon.com Inc. in the definition of remote sellers with the obligation to meet the notice and reporting requirements. Amazon this year finalized agreements to collect and remit taxes in every state that has a sales and use tax.
During the MTC teleconference, Michael Mazerov, senior fellow with the Center on Budget and Policy Priorities, said one of the benefits of placing the reporting and notice requirements on marketplace providers is that it could allay consumer’s privacy concerns raised by the forwarding of purchase information to the state.
“If you have marketplace providers do it, they wouldn’t have to report the name of the individual seller,” Mazerov said. “You wouldn’t have to disclose the identity of the individual seller,” thereby cutting back on the amount of information going to the state about the products and services consumers are buying, he said.
Phil Horwitz, director of tax policy in the Colorado Department of Revenue, agreed, adding that consumers often think about having made a purchase from the marketplace provider—not the individual underlying seller.
“They might not even know who the individual seller is,” he said. “Also, marketplace sellers sometimes sell items together as a bundled package, and the items might come from different individual retailers” even though they are sold together in a single transaction by the marketplace provider, he said.
Lawmakers in Colorado turned back a last-ditch effort in May to block the effectiveness of the 2010 reporting law based on privacy concerns.
The MTC work group also took up the question of whether to expand the reporting and notice model to include short-term rental property platforms such as Airbnb as having to comply with the law. Horwitz said he thought the group should “leave the issue at the side of the road” for now.
The work group is scheduled to meet again June 7.
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More information about the MTC Use Tax Information Reporting Work Group is at http://src.bna.com/pro.
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