In July, I blogged about the formation of a Study Committee in Vermont on the Sales and Use Tax (7/3/12 post). Well, I had the opportunity to testify before the committee (by phone) on October 15, 2012. This committee will look at a few aspects of sales tax issues. The October 15 hearing focused on e-commerce issues. I was asked to testify on State Solutions to Collecting from Remote Vendors.
A few of my comments:
"In framing
the issue it is important to consider the parameters states face in reaching
the goal of collecting sales and use tax in the e-commerce environment. The
state sales tax is an existing significant tax. In Vermont it represents about 24% of the total
tax base. It would be good to collect this tax that's already on the books
rather than raise or create other taxes.
The challenge is the nexus requirement for sales tax which provides that
vendors need only collect sales tax from customers, if the vendor has a
physical presence in the state, and that presence is more than a slightest
presence and per the 1987 Tyler Pipe case, "whether
the activities performed in [the] state on behalf of the taxpayer are
significantly associated with the taxpayer's ability to establish and maintain
a market in this state for the sales.""
Physical
presence is not an entirely clear standard as evidenced by conflicting decisions
among state courts and sometimes even between a higher and lower court within
the same state. As noted by the District Court in the Direct Marketing
Association v Colorado
case of 2012, the Quill decision puts
states in a "difficult position." Quill and e-commerce leave states
with limited options to collect all of their sales tax.
I have created
a map that shows various actions taken by some states which I'll
get into shortly. But it is important to
note that whether the action was joining the Streamlined Sales and Use Tax
Project or enacting so-called "Amazon" laws or affiliate nexus laws,
no state is collecting all of the sales and use tax it is entitled to.
Looking at
state actions to collect sales and use tax, we should consider both legislative actions and administrative actions. States should
also consider sales and use tax in the context of both sellers and buyers and
the costs of compliance and competitive issues regarding whether vendors have
to collect. We also need to consider the reality that any federal solution will
most likely exempt small sellers, so consumers will still need to understand
their use tax obligations."
I noted that legislative measures in some states, such as the so-called "Amazon laws" were not effective because they do not apply to all vendors, are easy for vendors to avoid (such as by canceling their affiliate contracts), and might not meet the constitutional requirements of Quill and Tyler Pipe. I noted, as I've been stressing for years, that adminstrative efforts should be pursued including finding vendors who do have a physical presence in the state and better educating consumers about their use tax obligations.
I'll post more later on some of my recommendations.
What state action would you recommend to improve sales/use tax collection on e-commerce sales?
3 comments:
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