US Congressman taking steps to preserve Quill among recent criticism
TAX BLOG |
The physical presence nexus standard adopted through Quill v. North Dakota has come under fire from the states and through U.S. Supreme Court dicta questioning the relevance of the standard in today’s e-commerce centric economy. South Dakota and Alabama have enacted statutes and promulgated regulations, respectively, directly conflicting with the physical presence standard – and both states’ laws are currently challenged in litigation. Additionally, you’ve likely heard about the Marketplace Fairness Act – a congressional attempt to address remote sales tax collection, which up to this point, has been a somewhat Sisyphean endeavor.
Recently, U.S. Congressman Jim Sensenbrenner (R-WI) took a different approach in introducing H.R. 5893, the No Regulation Without Representation Act of 2016, which provides for the codification of the physical presence standard adopted through Quill. The bill would permit a state to impose a collection and filing obligation on a remote seller during the calendar quarter with respect to which the obligation or assessment is imposed. Physical presence could be established by owning or leasing real property, maintaining employees in a state, or maintaining an office in the state.
Interestingly, the bill also addresses the states’ recent expansion of sales and use tax nexus by preempting state click-through nexus laws, currently enacted in about 20 states, and provides for a 15-day threshold to establish nexus based on physical presence. Use tax reporting requirements, such as the Colorado requirements under litigation in the DMA case, would also be preempted by the bill.
Other federal legislation addressing remote sales tax collection or nexus includes:
- S. 698 – Marketplace Fairness Act of 2015 (remote seller sales tax collection)
- H.R. 2775 –Remote Transactions Parity Act of 2015 (remote seller sales tax collection)
- H.R. 2584 – Business Activity Tax Simplification Act of 2015 (sales tax nexus)
While remote sales tax collection and nexus standards have become “hot topics” in the state and local tax world, it is doubtful that any meaningful federal legislation will be passed this year due to the congressional election cycle and the presidential race – but anything can happen. Businesses should keep an eye out for developments in this area.
For more on the many approaches to online and remote seller sales tax, read our white paper: What’s the deal with sales and use tax on remote purchases?