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No Online Sales Tax This Year

Online retailers can breathe a sigh of tax relief.
 
At least until February.
 
Last week, it was reported that House Speaker John Boehner would not bring the Marketplace Fairness Act for a vote in this current Congress.  Members of the House say that the Act may come up for a vote when the new Congress convenes in 2015.  The Senate had previously passed a version of the Act in 2013.

How would the Act affect online retailers?
 
Well, currently, an online retailer is only required to collect and remit taxes from customers in those states where the retailer has a substantial nexus.  This means that an online retailer may sell products in every state, but only has to collect and remit sales tax in those states where they essentially have business operations.  Most online retailers only have business operations in one state.  This means that they are only required to collect and remit sales taxes from online sales in that one state.
 
The Marketplace Fairness Act would change this structure.  The Act would allow states to require online retailers to collect and remit taxes made on sales to customers within those states.  In the example used above, the online retailer that sells in every state could be required to collect and remit sales tax in each one of those states.  While the Senate version of the Act did contain an exception for those retailers with less than $1 million in gross receipts, overall, the Act will still create a significant tax compliance burden for online retailers.
 
We will continue to keep you posted on the status of the Marketplace Fairness Act or any iterations thereof.  If you have questions about e-commerce stores or online sales, contact a member of MacDonald Illig’s Tax or Emerging Technologies Practice Groups.  Also, if you know of someone who would be interested in receiving these updates, please contact vmadden@mijb.com.