Sales Tax Slice: You Spent How Much on Shoes?! State and Local Governments are Demanding More Transparency Regarding Use Tax Liability
In recent years, states and local regimes have begun to require more transparency in the reporting of taxable transactions in an attempt to capture more use tax liability. In particular, notification and reporting regimes have become an increasingly popular method for states to try to collect use tax liability from their residents. On the local side, some city governments are also getting creative in their attempts to get purchasers to open up about their use tax liability.
In Colorado, for instance, a notification and reporting regime was upheld last year by the Tenth Circuit in Direct Marketing Association v. Brohl requiring sellers that make over $100,000 in sales to give notice to Colorado purchasers that their purchases are taxable and to send reports to the state showing the total amount paid by the purchaser that year for online purchases. The parties involved in Direct Marketing Association v. Brohl settled their claims on Feb. 22, 2017, as reported by Tripp Baltz in Bloomberg BNA’s Daily Tax Report (subscription required); as a result of this settlement, Colorado will not enforce its notification and reporting statutes until July 1, 2017, and will not impose penalties for noncompliance with the law prior to that date. Other states that currently have some type of reporting or notification laws in place include Kentucky, Louisiana, Oklahoma, South Dakota and Vermont.
Several states have advanced bills imposing notification and reporting requirements on out-of-state sellers during the most recent legislative session, perhaps as a result of the Supreme Court declining to hear the Direct Marketing Association’s appeal in December 2016. States with pending notification and reporting requirement bills include Arkansas, Georgia, Kansas, Hawaii, Nebraska and Utah.
Additionally, Alabama is considering a bill that differs from other standard notification and reporting bills. S.B. 86 would allow the Alabama Department of Revenue to adopt regulations that require sellers to report retail sales made to Alabama purchasers and to provide customer notifications that sales tax is due when a seller does not collect tax, according to Chris Marr in Bloomberg BNA’s Weekly State Tax Report (subscription required).
Pennsylvania is also considering a bill that varies from other notification and reporting regimes. H.B. 542 requires notification to consumers that they may owe use tax but does not require sellers to report the total amount of a consumer’s purchases in a year to the state.
While reporting and notification requirements may have been intended to coerce retailers to collect and remit taxes even in states where they do not have a physical presence, some retailers have decided to comply with the notification and reporting requirements instead of collecting and remitting the taxes, as reported by Bloomberg BNA’s Tripp Baltz.
All these notification and reporting regimes may lead some online shoppers to wonder about the privacy of their purchases. However, consumers may be relieved to know that these rules only require sellers to report the total dollar amount of sales made to each purchaser and not to enumerate the items sold. That being said, one local government is starting to require prominent purchasers to publicly pledge to pay use tax on their online purchases. The City Council of Holladay, Utah, recently unanimously approved a resolution whereby council members will take a pledge to report and pay use taxes on their purchases, according to The Salt Lake Tribune.
Whether these new notification and reporting requirements will be found constitutional and whether they will compel sellers to collect and remit taxes is an open question. However, it seems certain that tax professionals will be watching these developments closely as they unfold.
Continue the discussion on LinkedIn: Should states require sellers to make disclosures about taxpayers’ purchases?
For more information about state tax issues, sign up for a freetrial on Bloomberg BNA’s Premier State Tax Library.
By Emilie Burnette
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)