Sales Tax Slice: Now That the Ink is Dry on the PITFA, Remote Seller Legislation Comes to the Fore This Year

As they say at De Beers, “A Diamond is Forever.” In that sense, the Permanent Internet Tax Freedom Act (PITFA) is like a diamond. It forever extends a formerly temporary ban on state Internet access taxes, as reported in the Daily Tax Report last week.

Congress first placed a moratorium on new Internet access taxes back in 1998, and on each of five occasions the legislature has extended it for a few years. But until now, the moratorium was never permanent. Following President Obama’s signature last Wednesday, it becomes a lasting ban.

Further, the PITFA addresses grandfathered Internet access taxes in the seven states whose legislation preceded the original 1998 act. Under the PITFA, those seven remaining states’ grandfathered taxes will sunset on June 30, 2020.

The PITFA is only two sentences in length, but it comes packaged as the tail end of a much larger, unrelated customs bill: the Trade Facilitation and Trade Enforcement Act of 2015 (H.R. 644). Why? Because although keeping access to the Internet tax-free is not a hot-button political issue itself—the PITFA passed in the U.S. House on a simple voice vote twice recently—the PITFA has for several years been embroiled in a much more contentious dispute over states’ ability to require out-of-state retailers to collect and remit sales tax on their remote sales. Several times, lawmakers have tried to pair the popular PITFA with hotly contested remote sales bills such as the Marketplace Fairness Act and the Remote Transactions Parity Act. Each time, the combined bill’s remote sales component stymied the entire package, and the PITFA never became law.

In fact, the PITFA made it through via H.R. 644 last week only because Senate Minority Whip Dick Durbin (D-Ill.) agreed to stand down on an objection that his opponents “bypassed regular order by airdropping [the PITFA] into a totally unrelated [customs] bill . . . at the very last minute.” In a deal brokered with Senate Majority Leader Mitch McConnell (R-Ky.), Sen. Durbin allowed the customs bill to come to a vote with the added PITFA language present in exchange for Sen. McConnell allowing a vote on a standalone remote sales bill later this year, as explained in the Daily Tax Report.

Observers have written extensively on federal remote seller legislation and on the merits and drawbacks of a combined package. The stakes are still high to this day. Suffice it to say, now that the ink is dry on the PITFA, interested parties are lining up for the real battle.

Continue the discussion on LinkedIn: How will remote seller legislation fare in Congress now that legislators cannot combine it with the PITFA?

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By Ryan J. Voorhees