Remote Sales Tax Collection Legislation Introduced in the House

Wednesday, June 24, 2015

Last week, Congressman Jason Chaffetz (R-UT-3) introduced legislation (HR 2775) that would enable state and local governments to collect taxes from retailers on remote sales.  The legislation, the Remote Transaction Parity Act (RTPA), is similar to the Marketplace Fairness Act (S 698) in that both bills would compel retailers to collect taxes on remote sales based on the location of the consumer rather than the location of the retailer. Under the legislation, the state in which the consumer resides could compel out-of-state retailers to collect remote sales taxes, either as a member of the Streamlined Sales Tax Governing Board or through the use of certified software providers. Also like the Marketplace Fairness Act, RTPA enjoys bi-partisan support, including that of John Conyers (D-MI-13), Ranking Member of the House Judiciary Committee.  
 
However, RTPA differs from the Marketplace Fairness Act in a few key areas. First, for the states that do not belong to the Streamlined Sales Tax Governing Board, remote sellers will be required to collect and remit sales and use tax if they comply with several mandatory requirements, including the use of certified software providers. Under RPTA, the certified software providers would be granted free access to installation, setup, and maintenance, a value that represents a plausibly large liability without a clearly defined payer.  
 
Second, RTPA addresses vendors’ concerns about the prospect of audits from multiple states. It does this by requiring companies that use software certified by the states to deal only with auditors from their home state and any other states where they have a physical presence. The challenge with this stipulation is that physical presence is established where a company maintains property and employees for at least 15 days in a year, a condition that does not take into account all aspects of business’ economic presence within a state or locality.
 
In the short term there is no clear indication of RTPA’s future, but GFOA’s Federal Liaison Center will be working closely with Chaffetz, cosponsors of RTPA, and our colleagues at the National League of Cities, U.S. Conference of Mayors, and National Association of Counties to support the advancement of the bill and ensure that our concerns with the legislation are addressed.