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New State Online Sales Tax Bill Introduced in Congress

2 min readBy: Joseph Bishop-Henchman

Download RILA Bill Draft

See updated information about the bill here.

A new online sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. bill will be introduced in Congress today, following a press conference at 1:30PM today by the sponsors, Reps. Steve Womack (R-AR) and Jackie Speier (D-CA). This bill (titled the Marketplace Equity Act) is the one that large brick-and-mortar retailers have been working on in recent weeks, although its introduction is sooner than expected. (For background on online sales taxes, and previous bills such as the Main Street Fairness Act, see here.)

Although it hasn’t been released, this is a recent draft version (PDF) that will probably be close to what is introduced today. Key points of this bill are that it permits states to require out-of-state sellers with no physical presence in the state (“remote sellers”) to collect sales taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. if:

  • The remote seller (including all “related entities”) has sales in the U.S. exceeding $5 million and sales in the state exceeding $500,000
  • The state must develop a sales tax return specifically for remote sellers
  • States may only require remote sellers to collect tax at one rate per state (a blended total of state and local taxes: for an idea of these, see our recent local sales tax report). If a state wishes to impose a lower rate on food, drugs, or medicine, it can require collection of one additional tax rate for all of these items.
  • The state must publish a notice within 7 days of passing its law listing the requirement, the criteria under which collection is required, the effective date, the rate or rates, and where sellers can obtain the tax filing return.
  • It would affect sales beginning three months after the enactment of the legislation.
  • States cannot require the filing of sales tax returns more frequently than for other sellers.
  • No other requirement to collect sales taxes can be imposed on remote sellers.
  • Litigation against states out of compliance with the law will be heard by the Court of Federal Claims.
  • Facilitators of remote sellers may be required to disclose the names of all sellers that make over $5 million nationwide through the facilitator.

Again, the bill introduced today may be different from that version. We’ll post updates on this new proposal as it develops.