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By Ryan Prete
The Multistate Tax Commission is allowing additional time for comment on a model law that would impose reporting and notice obligations on out-of-state vendors that don’t collect sales and use taxes on remote sales.
The commission said during a June 14 public hearing that it would accept additional comments on the model until June 30.
The model sales and use tax notice and reporting statute, which mirrors a 2010 Colorado law, was approved by the MTC Executive Committee in April during its spring meeting in Minneapolis.
During the public hearing, the American Institute of CPAs (AICPA) testified in opposition, citing “significant concerns.”
“The AICPA urges the MTC and its member states not to adopt the draft model statute because it is contrary to good tax policy, has many costs and few benefits, and will lead to further complications and burdens on customers, sellers, marketplace facilitators and referrers, as well as the state,” Cathie Stanton, chair of the AICPA State and Local Tax Technical Resource Panel, said. “Other, more effective alternatives exist that properly place the sales and use tax burden on the appropriate party—the in-state buyer.”
The MTC Executive Committee is expected to receive a report on the hearing during its annual meeting Aug. 26 in Boston.
Colorado’s law, which was affirmed as constitutional by the U.S. Court of Appeals for the Tenth Circuit in February 2016, requires sellers that don’t collect and remit Colorado sales and use taxes to (1) notify buyers at the time of transaction that tax isn’t being collected but may be due; (2) provide consumers an annual report of their purchases; and (3) send an annual report showing the total dollar amount of each buyer’s purchases.
Similar laws have been approved recently in Alabama, Georgia, Kentucky, Louisiana, Oklahoma, Pennsylvania, Rhode Island, South Dakota, Vermont, and Washington, and many other state legislatures have taken up reporting and notice proposals, according to the AICPA.
A portion of the public hearing focused on the effect of an impending U.S. Supreme Court decision concerning online sales tax.
South Dakota v. Wayfair is a long-awaited direct challenge to the 1992 decision in Quill Corp. v. North Dakota.Quill, which states for years have tried to “kill” through lawsuits and legislation, prohibits states from imposing sales tax collection obligations on vendors lacking an in-state physical presence.
Jamie Yesnowitz, a principal and state and local tax practice and national tax office leader at Grant Thornton LLP, raised the question of whether states would still be interested in the reporting statute if the high court rules in favor of South Dakota.
Members of the commission said they would look to the ruling as “additional guidance” for the notice and reporting statute.
Both Yesnowitz and Stanton recommended against applying Colorado-style laws to marketplace facilitators such as Amazon.com Inc. and Etsy Inc.
Yesnowitz, who said he was speaking solely as a representative of the state and local tax community, compared facilitators to shopping centers.
“It would be like asking malls to collect and remit sales tax, and this idea could go a step too far,” Yesnowitz said. “This may not be constitutionally viable.”
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