Archive for the ‘Colorado’ category

Proposed Remote Seller Notice and Reporting Requirements in Pennsylvania Post-DMA

March 8, 2017

By Adam Koelsch

Just a few months after the U.S. Supreme Court declined to review the decision of the Tenth Circuit in Direct Mktg. Ass’n v. Brohl — which upheld Colorado’s sales tax notice and reporting requirements for out-of-state retailers — a Pennsylvania lawmaker has reintroduced a bill requiring online retailers to notify Pennsylvania purchasers when sales and use tax is due on their purchases.

In 2010, the Colorado legislature enacted a statute which requires a remote retailer that sells products to Colorado customers, but does not collect Colorado sales tax, to notify those customers that sales or use tax is due on certain purchases made from the retailer and that Colorado requires those customers to file sales or use tax returns.  Colo. Rev. Stat. § 39-21-112 (3.5)(c)(I).  Failure to provide that notice subjects the retailer to a penalty of five dollars ($5.00) for each such failure, unless the retailer shows reasonable cause for such failure.  Colo. Rev. Stat. § 39-21-112 (3.5)(c)(II).

In addition, the statute requires that such retailers must send a notification to each Colorado customer by January 31 of each year showing, among other information, the total amount paid by the customer for Colorado purchases made from the retailer in the previous calendar year.  Colo. Rev. Stat. § 39-21-112 (3.5)(d)(I)(A).  Failure to send that notification subjects the retailer to a penalty of ten dollars ($10.00) for each such failure, unless the retailer shows reasonable cause for such failure.  Colo. Rev. Stat. § 39-21-112 (3.5)(d)(III)(A).

The statute further requires that such retailers file an annual statement for each Colorado customer with the Department of Revenue showing the total amount paid for Colorado purchases by such customers during the preceding calendar year, to be filed on or before March 1 of each year.  Colo. Rev. Stat. § 39-21-112 (3.5)(d)(II)(A).  Failure to file that annual statement subjects the retailer to a penalty of ten dollars ($10.00) for each purchaser that should have been included in the statement, unless, again, the retailer shows reasonable cause for such failure.  Colo. Rev. Stat. § 39-21-112 (3.5)(d)(III)(B).

The Data & Marketing Association (“DMA,” formerly the Direct Marketing Association), challenged the above Colorado notice and reporting requirements in federal court, claiming that those requirements violated the Interstate Commerce Clause of the U.S. Constitution by imposing burdens on out-of-state retailers that were not imposed upon in-state retailers.  In 2011, a preliminary injunction was issued by the federal district court, which, in 2012, also concluded that the Colorado statute violated the Commerce Clause.  In 2013, the Tenth Circuit dissolved the injunction and reversed the decision of the district court — holding that the district court did not have jurisdiction pursuant to the Tax Injunction Act — only to, in turn, have its decision reversed by the U.S. Supreme Court on March 3, 2015, in Direct Mktg. Ass’n v. Brohl, 135 S. Ct. 1124 (2015).  On remand, the Tenth Circuit again reversed the district court, holding that the Colorado statute did not violate the Commerce Clause.  On December 12, 2016, the U.S. Supreme Court denied DMA’s petition for a writ of certiorari.

Meanwhile, after the Tenth Circuit had dissolved the preliminary injunction in 2013, DMA had filed for, and had obtained, another injunction in Colorado state court.

But, on February 23, 2017, DMA and the State of Colorado settled the case, thereby dissolving the state court injunction and finally ending the litigation.  As part of that settlement, the Department of Revenue agreed that the litigation involving DMA over the constitutionality of the statute had constituted reasonable cause for non-compliance with the statute, and that, therefore, the Department would not require compliance with the statute and its accompanying regulations before July 1, 2017, and that it would waive any penalties for failure to comply with the statute and the regulations before that date.

Subsequent to the U.S. Supreme Court’s refusal to review the Tenth Circuit’s decision, a number of states have introduced bills to create notice and reporting requirements similar to those of Colorado.  In particular, in Pennsylvania, on February 17, 2017, Rep. W. Curits Thomas introduced H.B. 542 — a bill substantially similar to the one which he had introduced in 2015, only to have it die in committee when the legislative session adjourned.

H.B. 542 imposes more modest requirements than the Colorado statute.  For instance, H.B. 542 does not require that annual notifications be sent to purchasers, or require that an annual statement be filed with the Pennsylvania Department of Revenue.  Instead, the proposed statute requires that a seller or a remote seller “conspicuously provide” to a Pennsylvania purchaser, on each separate sale of tangible personal property or taxable services via an Internet website operated by that seller or remote seller, the following notice:

Unless you paid Pennsylvania sales tax on this purchase, you may owe a Pennsylvania use tax on this purchase based on the total sales price of the purchase in accordance with the act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of 1971. Visit http://www.revenue.state.pa.us for more information.  If you owe a Pennsylvania use tax on this purchase, you must report and remit the tax on your Pennsylvania income tax form.

H.B. 542 § 279(a).  The proposed statute provides no guidance regarding what constitutes a sufficiently “conspicuous” notice.

A failure by the seller to provide such notice will subject the seller to a fine of “not less than” five dollars ($5.00) for each such failure.  H.B. 542 § 279(b).  The proposed statute would be applicable only to transactions occurring more than sixty (60) days after its enactment.

In light of this proposed statute, and those like it introduced in other states, remote sellers should be alert to any newly imposed notice and reporting requirements in each of the states in which they sell their products.

The text of H.B. 542 is available here.

Weekly Update for 3/2: Georgia Considers “Amazon” Law; Verizon Challenges Statute of Limitations in Florida Assessment; Maryland Rules on Statute of Limitations for Refund…and more.

March 5, 2012

 by Jennifer Weidler

COLORADO

Colorado DOR Issues Letter Ruling Discussing Tax Exempt Status of Photovoltaic Energy Systems

The Colorado Department of Revenue issued a letter ruling explaining the sales exempt status of photovoltaic energy systems.  The letter ruling clarified that a company or customer who purchases photovoltaic energy systems is exempt from sales tax because all sales and uses of qualifying renewable energy components are entitled to the renewable component exemption.

FLORIDA

Verizon Business Purchasing, LLC Challenges Florida Sales and Use Tax Assessment

Verizon Business Purchasing, LLC has filed a complaint challenging a $3 million Florida sales and use tax assessment, claiming that the statute of limitations expired prior to the proposed assessment becoming final.  The complaint alleges that the final assessment was invalid because although the parties agreed to extend that statute of limitations until March 31, 2011, the notice of proposed assessment was issued with less than sixty days left in the statute of limitations period. Therefore, the complaint contends, it did not become a final assessment until the expiration of the sixty days, on April 11, 2011, which was after the statute of limitations had lapsed.

GEORGIA

Georgia House Considers “Amazon” Law

The Georgia House of Representatives is considering legislation, HB 993, which would implement click-through nexus and similar provisions, aimed at requiring out-of-state online retailers to collect state sales tax.  The legislation contains a threshold that must be met: an out-of-state online retailer must have at least $10,000 in annual sales through in-state affiliates receiving a commission in order to be subject to collecting the tax.


HAWAII

Hawaii Senate Committee Passes Streamlined Sales and Use Tax Legislation

The Hawaii Senate Ways and Means Committee passed legislation, SB 2226, which would bring the state into conformity with the Streamlined Sales and Use Tax Agreement.

INDIANA

U.S. Supreme Court Hears Oral Arguments in Armour v. Indianapolis

The United States Supreme Court heard oral arguments in Armour v. Indianapolis, which tackles an equal protection challenge.  During 2001, Indianapolis gave taxpayers the option of paying upfront or in monthly installments for special assessments related to the connection of their properties to city sewers.  The case challenges the city’s decision not to provide refunds to taxpayers who paid a sewer special assessment in lump sum, while forgiving outstanding balances for those taxpayers who entered into installment plans.  The Indiana Supreme Court held that the Board had a rational basis for its decision to deny refunds while eliminating outstanding balances.

Indiana House Approves Legislation to Phase-Out Inheritance Tax

The Indiana House approved legislation, SB 293, which would phase-out Indiana’s inheritance tax by increasing the exemption for children and grandchildren from $100,000 to $250,000.  The increase would apply to decedents dying after July 1, 2012.


MARYLAND

Maryland Rules on Statute of Limitations for Refund

The Maryland Court of Appeals ruled that the one-year statute of limitations for the filing of a limited partner’s state income tax refund claim pursuant to a federal adjustment of the partnership return began to run on the date that the Internal Revenue Service issued its final adjustment report to the limited partner.  Since the taxpayer filed its claim for refund more than one year after the date that the Internal Revenue Service issued its final adjustment report, the taxpayer’s refund was denied.

MINNESOTA

Minnesota Considers Legislation to Classify Jurisdictions as Tax Havens

Two separate bills, HF 2480 and SF 2029, currently under consideration by the Minnesota legislature would classify 34 foreign jurisdictions as tax havens, thereby terminating the ability of corporations to shelter their earnings in those areas. The legislation would also repeal the state’s foreign royalty exclusion, eliminate the state’s preferences for foreign-source income, and eliminate the state’s transition to single-sales-factor, instead re-implementing the three-factor formula.

NEVADA

Nevada Supreme Court Reverses Dismissal of Property Tax Petition for Board’s Failure to Conduct Public Hearings

The Nevada Supreme Court reversed the dismissal of property taxpayers’ petition for writ of mandamus directing the State Board of Equalization to equalize property valuations throughout the state, because the Board failed to conduct public hearings thereby denying the taxpayers an adequate remedy at law.

NEW YORK

New York Issues Guidance on Application of Sales Tax to Gratuities and Service Charges

The New York Department of Taxation and Finance issued guidance explaining how sales tax applies to gratuities and service charges.  The guidance clarifies that mandatory gratuities and service charges are exempt if: (1) the charges are shown separately on a bill; (2) identified as gratuities; and (3) the entire gratuity amount is given to the employees.

OKLAHOMA

Federal Court Rules Against Oklahoma Indian Tribe’s Tobacco Tax Claims

A Federal Court held that an Indian tribe located in Oklahoma had failed to state a claim upon which relief could be granted in its complaint.  The complaint alleged that Oklahoma’s tobacco tax laws violated various constitutional rights and federal laws.  However, the court found that the claims were not valid either on grounds of preemption or on infringement of the tribe’s right to self-government.

WASHINGTON

Washington Legislation Would Abolish Sales and Use Tax Exemption for Some Out-of-State Shoppers

Legislation, HB 2791, currently under review by Washington’s House would abolish the sales and use tax exemption for certain out-of-state shoppers.  The exemption would no longer be available for residents of the U.S. and Canada whose province or state assesses consumption taxes of less than three percent.

2011 Year-End SALT Update

January 6, 2012

 by Jennifer Weidler

ARIZONA

Arizona DOR Finds Nexus for Sales Representatives Providing Customer Support and Training

Of course it had nexus: Arizona DOR rules that corporation has substantial nexus due to presence of sales representatives who provide customer support and training.

(more…)