Originally posted 1/22/2010 – Last UPDATED 6/30/2010 – Wow, there has been a lot of activity in individual States over the last few weeks after the State of New York reported generating $53 million in new sales and use tax revenue from the 30 companies ensnared by their Complex Nexus legislation (often referred to as the “Amazon” Tax – as we have written about before). While Rhode Island and North Carolina passed similar legislation last year, they have not reported how successful their efforts have been. Amazon.com ceased all affiliate operations in RI & NC based upon their adoption of these laws. Amazon has not ceased affiliate operations in New York, but has been engaged in an ugly court battle to challenging the validity and constitutionality of the law. California and Hawaii also considered (but did not pass) similar legislation late last year.
41 States have already identified significant budget shortfalls, projecting the worst budget shortfall ever! Our friends at The Center on Budget and Policy Priorities just released a detailed (and terrifying) report outlining a projected $194 billion deficit for 2010, and another $180 billion deficit for 2011.
As of this writing four states five states (just added Vermont) seven states (just added Maryland & Illinois) eight states (added California) nine nineteen states (just added Connecticut) added a bunch more have considered some sort of sales (use) tax legislation:
| STATE | BILL | INTRODUCED | EFFECTIVE | TYPE | SUMMARY | STATUS |
| ALL (FEDERAL LEGISLATION) | HR5660 | 7/1/10 | Main Street Fairness Act | Gives states the right to require remote sellers to collect sales tax. States must be members of the Streamlined Sales and Use Tax Agreement. | Introduced into Congress by Rep. Delahunt (D-MA). Has supporters from both the Democratic and Republican parties, as well as support from states. | |
| Arkansas | Entity Isolation | Existing legislation prohibits merchants from practicing entity isolation (i.e. claiming that web operations and store operations are unrelated). | Entity isolation legislation in effect. | |||
| California | Entity Isolation
Notification |
Existing legislation prohibits merchants from practicing entity isolation (i.e. claiming that web operations and store operations are unrelated).
Separate legislation has been considered to require merchants notify CA purchasers during checkout that they may owe Use tax. |
Entity isolation legislation in effect. The proposed new legislation on Notification passed the Senate 2/18/10 but failed to make it into final budget package. | |||
| Colorado | HB1193 | 1/20/10 | 1/1/10 | Notification
Reporting |
Requires online retailers to provide CO purchasers with a summary warning on web site and invoices and requires retailers to report this information to the state annually. Also requires retailers with over $1 mill annual sales to send a 1099-type notice to the customer. Retailers can avoid these requirements by collecting the sales tax. | Signed into law 2/24/10. Affiliate Marketing rules were considered but not included in the final law. |
| Connecticut | RB5481 | 3/8/10 | Affiliate Marketing ($2,000 threshold) | Died in Committee 5/5/10 | ||
| Florida | SB2552 | Other | Proposes FL allocates money to build software requiring credit card companies to collect sales tax. | Unlikely to pass. | ||
| Georgia | SB512 | 3/17/10 | Contingency Fees | Authorized GA to pay contingency fees to lawyers to sue retailers to enforce collection obligations. | Passed Senate 3/26/10 | |
| Illinois | SB3353 | Affiliate Marketing ($10,000 threshold) | Bill ‘held over’. | |||
| Indiana | Entity isolation | Existing legislation prohibits merchants from practicing entity isolation (i.e. claiming that web operations and store operations are unrelated). | Entity isolation legislation in effect. | |||
| Iowa | HF2510 | 3/1/10 | Affiliate Marketing | Died in Committee 3/2/10. | ||
| Maryland | SB824 | Died in Committee before the end of the 2010 legislative session. | ||||
| Mississippi | SB2927 | 1/20/10 | Affiliate Marketing ($0 threshold) | Died in Committee 2/2/10 | ||
| New Mexico | HB50 | 1/15/10 | Affiliate Marketing ($10,000 threshold) | Died in Committee 5/3/10 | ||
| New York | 6/1/08 | Affiliate Marketing ($10,000 threshold) | NY reported that it generated $53 million in new use tax from the 30 companies affected by its Affiliate Marketing law. | Signed into law April 2008 | ||
| North Carolina | 4/23/10 | Affiliate Marketing | Signed into law in 8/5/09. | |||
| Oklahoma | HB2359 | 1/5/10 | 7/1/10 | Notification | Requires retailers to post a notice to OK residents on the checkout page that they may be liable for use tax, and to disclose this on the invoice. | Signed into law 5/28/10. |
| Rhode Island | 7/1/2009 | Affiliate Marketing ($5,000 threshold) | Signed into law 6/30/09 | |||
| Tennessee | SB1741, HB1947 | 3/19/09 | Affiliate Marketing
Notification |
Died in Committee 4/20/10 | ||
| Vermont | HB661 | 1/29/10 | Affiliate Marketing ($10,000 threshold) | Died in Committee. | ||
| Virginia | SB660 | 1/21/10 | Affiliate Marketing ($10,000 threshold) | Died in House subcommittee 2/24/10 |
Please Note: The information provided on this web site is intended to stimulate discussion about sales tax issues affecting online merchants. While we make every effort to provide accurate information, readers should refer to their own tax counsel, state and local laws and other source documents for more detail.
All of this activity at the state level should provide ample indication to our Senators and Representatives in Washington D.C. that federal action is necessary to prevent a flood of varied state-by-state laws. Urge your Senators and Representatives to ask around on the hill, and find out what is holding up introduction (and passage) the the Main Street Fairness Act!
Here at Fed-Tax.net we are eager to help all Internet merchants easily and automatically calculate and remit correct local sales tax for every jurisdiction in the United States – at zero cost to merchants. We will do this regardless of which system ultimately prevails, state-by-state affiliate taxes, or a federally authorized Streamlined Sales and Use Tax Agreement.
Our TaxCloud service will launch later this year (watch here for our preview release announcement soon), and will demonstrate beyond any shadow of doubt that it is no longer overly burdensome (technically or financially) for remote sellers to comply with all local sales tax laws. We are building TaxCloud to activate the opinion of the Court as originally penned by Justice Stewart in 1967 (and re-affirmed in 1992) which invited congress to act once “the skill of contemporary man and his machines” has solved this problem.
UPDATE – COLORADO SB 1193 2/2/2010: Last night the Colorado House of Representatives voted (on “Shall the bill pass?”) 33 (Yes) to 32 (No). So, they PASSED SB 1193 – Here is the Current (Amended) Bill now on its way through the Colorado Senate.
UPDATE – VERMONT HB 661 Introduced 2/3/2010: Just saw that Vermont also introduced their own version of an affiliate tax late last week. Sorry we missed it.
UPDATE – Colorado SB 1193 Revised 2/8/2010 – the Colorado Senate has revised SB 1193 significantly.
UPDATE – Maryland SB 824 Introduced 2/10/2010
UPDATE – Illinois SB 3353 Introduced 2/10/2010
UPDATE – California Senate passes AB 8 2/18/2010
UPDATE – Colorado SB 1193 is now LAW – The Governor of the State of Colorado – see Emergency Regulation 39-21-112.3.5.
UPDATE OKLAHOMA HB2359 is now LAW. It requires retailers to post a notice to OK residents on the checkout page that they may be liable for use tax, and to disclose that information on any invoice sent to the customer.
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