Work Remains on Multistate Model Use Tax Reporting, Notice Law

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By Tripp Baltz

A Multistate Tax Commission model statute on sales and use tax information must be clear about who is responsible for meeting its reporting and notice requirements in order to achieve compliance from remote sellers and marketplace facilitators, members of the MTC’s Uniformity Committee said.

A work group of the Uniformity Committee presented the latest version of the draft model law Nov. 16 during the MTC’s Fall Committee Meetings in New Orleans. The group had planned to ask the Uniformity Committee to approve the draft and forward it to the MTC Executive Committee for its consideration, but there were so many questions and suggestions for revision from states that the group decided not to seek a vote at the New Orleans meeting, said Phil Horwitz, director of tax policy analysis with the Colorado Department of Revenue and chair of the work group.

The draft model statute uses a 2010 Colorado law as its starting point. That 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.

Entity Definitions

The draft model law also defines the entities that might have a reporting or notice obligation: “marketplace,” “marketplace facilitator,” “referrer,” and “seller.” One of the proposals to go back to the work group is a new definition for “person,” Horwitz said. Depending on the situation, companies such as Amazon.com Inc., eBay Inc., Overstock.com Inc. and Etsy Inc. may be viewed as sellers, marketplaces, or marketplace facilitators under the draft model.

At present, the model requires sellers to provide the transactional notice to buyers, unless a marketplace provider facilitated the sale. In the case of a “Fulfillment by Amazon” transaction, Amazon would be responsible for providing notice to the buyer if a seller sold the product or good on Amazon’s online marketplace.

One comment on the draft asked if the language would allow for sellers to negotiate with marketplaces to let the sellers provide notice and annual reports to state revenue departments, Horwitz noted. “If they want to negotiate a different arrangement, and we still get our reports, maybe we shouldn’t stand in their way,” he said.

Penalty Problems

Michael Fatale, deputy general counsel of the Massachusetts Department of Revenue, said that “if it’s unclear who’s supposed to deal with it, then with the penalty mechanism it becomes problematic.” Entities required to report could face penalties in states that adopt their own version of the model law.

Horwitz said he was confident the work group could continue tweaking the language of the statute and return to the Uniformity Committee in “the next month and a half.”

To contact the reporter on this story: Tripp Baltz in New Orleans at abaltz@bna.com

To contact the editor responsible for this story: Cheryl Saenz at csaenz@bna.com

For More Information

Text of the draft model statute is at http://src.bna.com/uiv.

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