The Marketplace Fairness Act is dead, long live the Remote Transactions Parity Act?
On June 15th House Oversight Chairman Jason Chaffetz (R-Utah) introduced a new Internet sales tax bill he’s calling the Remote Transactions Parity Act (RTPA). The bill is similar to the Marketplace Fairness Act which died in the House last year. Supporters say this version has critical improvements as well as the support of some major players.
RTPA would require sellers without a physical presence in a state to collect sales tax on eligible transactions based on the going rate at the location of the consumer. The bill would also require states to simplify their tax codes, and pay to set up, install and maintain software for remote sellers to collect sales taxes.
According to the National Law Review, states that are members of the Streamlined Sales and Use Tax Agreement (SSUTA) would be automatically eligible to impose sales and use taxes on remote sellers. States that are not SSUTA members, about half of the states in the union, could be authorized to require retailers without nexus in the state to remit sales and use taxes on sales if they met the following simplification requirements:
- destination sourcing for interstate transactions;
- a single entity for administration of sales and use tax;
- a single audit of remote sellers per state;
- a single return per state;
- uniform tax base for all state and local sales taxes within the state; and
- relief for errors, including remote sellers being relieved of errors made by a certified software provider or the state itself, and certified software providers being relieved of errors made by a remote seller or the state itself
The bill has bipartisan support as well as the backing of some of the major players in the industry: Amazon, Overstock and the National Retail Foundation.
The RTPA isn’t enjoying unanimous support however. Dissent comes mainly from withing the split Republican party with conservatives labeling this as a tax increase or an Internet sales tax, and that it amounts to taxation without representation.
House Judiciary Chairman Bob Goodlatte (R-Va.) circulated his own draft proposal last January calling for the sales tax rates to be based on the retailer’s location. Goodlatte has also expressed concerns about protecting small businesses from audits, and that exempting certain small sellers would make a bill too complicated.
The RTPA differs from the MFA in that the small seller exemption starts at $10 million or less and gradually phases out over time. MFA’s exemption is continuous for sellers making less than $1 million. The RTPA also provides audit protection for sellers grossing less than $5 million unless there is reasonable suspicion of fraud.
RTPA faces opposition from its own set of power players: NetChoice, the R Street Institute and Americans for Tax Reform.
While the Marketplace Fairness Act managed to pass through the Democrat-led Senate in 2013, Speaker John Boehner (R-Ohio) and Senate Majority Leader Mitch McConnell (R-Ky.) have shown no interest in debating the bill this year even though it has been reintroduced.
Lucinda Rowlands has been the general manager at Zip2Tax since 2010. She has extensively researched sales and use tax regulations in order to help small businesses navigate complicated tax rules.