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By Tripp Baltz
Partnership audits and states’ continued efforts to collect more taxes on remote sales will be front and center Jan. 14 at a meeting of the National Conference of State Legislatures Task Force on State and Local Taxation.
Notice and reporting requirements for online retailers are expected to pop up in many states this year, as is a continued increase in measures challenging the 1992 Supreme Court ruling in Quill Corp. v. North Dakota, which permits states to impose sales and use tax obligations only on vendors with an in-state physical presence.
An update on states’ remote sales tax collection will be one of the highlights of the task force meeting, Max Behlke, director of Budget and Tax Policy in the NCSL’s Washington D.C. Office, told Bloomberg BNA on Jan. 10.
“Sixty-nine of the 99 state chambers across the country have Republican majorities, and they say they want more revenue but don’t want to raise taxes,” he said. Sales and use taxes that are due but not paid and remitted is one way to recoup lost revenue, but many states are considering more options.
“We expect a lot of activity this year,” he said. “The question is, are we going to see more Colorado-style reporting bills, or more like South Dakota’s” that go directly after non-remitting out-of-state retailers.
In December, the U.S. Supreme Court refused to take up an appeal of a federal appeals court ruling that upheld Colorado’s 2010 requirement that out-of-state retailers report sales to the state ( Direct Mktg. Ass’n v Brohl, U.S., No. 16-267, petition for certiorari denied 12/12/16 ; Brohl v. Direct Mktg. Ass’n, U.S., No. 16-458, petition for certiorari denied 12/12/16 ).
The South Dakota law is embroiled in litigation ( South Dakota v. Wayfair, Inc., D.S.D., No. 3:16-CV-03019, hearing 12/8/16 ).
There could be 20 or more states in 2017 that will consider a reporting-style bill, a challenge to Quill or both, Behlke said.
Also on the agenda for the Scottsdale, Ariz., meeting is a session on uniform state legislation conforming to the new federal partnership audit regime. The Council On State Taxation, the Tax Executives Institute, the American Bar Association’s SALT Committee and the American Institute of CPAs recently proposed a model draft uniform bill to the Multistate Tax Commission.
States have different procedures and time frames for reporting adjustments made to federal tax liability after audits. The groups said they believe uniformity among state approaches will increase efficiency for tax administrators and taxpayers. But state lawmakers are being urged to take a “wait-and-see approach,” especially given that changes are likely from a technical corrections bill pending in Congress.
Another session will prompt state lawmakers to consider whether the corporate income tax is worth it, Behlke said. Currently, 43 states levy corporate income taxes at rates ranging from 4 percent to 12 percent. Some tax specialists have argued that because of the high cost of compliance and administration, the tax should be eliminated. Missouri already has introduced a bill to eliminate the tax this session.
The impact of state tax increases and decreases on economic growth will be the focus of another session featuring speakers from the Tax Foundation and the Center on Budget and Policy Priorities.
The meeting agenda also includes the following:
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