Posted tagged ‘pennsylvania legislature’

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 3/9: Arizona Rejects Amazon Legislation, While New Jersey Considers Implementing Amazon Law; Missouri Considers Amnesty Legislation; Pennsylvania Considers Closing the “Delaware Loophole”…and more.

March 12, 2012

 by Jennifer Weidler

ARIZONA

Arizona Senate Rejects Proposed Amazon Legislation

The Arizona Senate rejected proposed Amazon legislation, SB 1338, which would have broadened Arizona’s definition of retailer to include any company with a warehouse in the state.

CALIFORNIA

California Revises Publication on Internet Sales, Incorporating eBooks and Apps

The California State Board of Equalization revised Publication 109 regarding Internet Sales, in order to provide guidance on the tax treatment of eBooks and apps.  According to the Publication, the transfer of a downloadable file such as an eBook or app is not a taxable transaction, without purchasing any physical storage medium.

GEORGIA

Georgia House Approves Legislation to Establish Tax Tribunal

The Georgia House of Representatives approved legislation, HB 100, which would establish a state Tax Tribunal in the state’s judicial branch.

ILLINOIS

Illinois Releases Information Letter of “Deal-of-the-Day” Transactions

The Illinois Department of Revenue issued an Information Letter providing guidance on the treatment of “Deal-of-the-Day” transactions.  For more detailed information, see the Information Letter.

IOWA

Iowa Court Grants Refund Relief for Illegal Taxation

The Iowa District Court ordered a refund of franchise fees that were collected in excess of the amount determined to be allowable for which the City of Des Moines could impose.  The court found that the refund was a constitutional remedy for the illegal taxation of the city’s residents.  The fact that the funds gathered from the illegal taxation were used wisely, legally and with the best intentions was not a defense.

MISSOURI

Missouri House Approves Amnesty Legislation

The Missouri House has approved legislation, HB 1030, which would offer a tax amnesty period, slated to run from August 1 to October 31, 2012.  The amnesty program would cover all taxes administered by the Department of Revenue and would waive penalties.  The amnesty program is projected to raise $75 million for the state.

NEW JERSEY

New Jersey Finds Nexus Based on Telecommuting Employee

The New Jersey Superior Court upheld a Tax Court ruling, which found that a foreign corporation was subject to the New Jersey Corporate Income Tax because it regularly and consistently permitted one of its employees to telecommute from her New Jersey residence.  Her full-time telecommuting was viewed as doing business in the state, thereby requiring the payment of the tax as well as the filing of corporate income tax returns in New Jersey.

New Jersey Introduces Amazon Legislation

Legislation, S 1762, has been introduced in New Jersey that would grant Amazon.com a temporary state sales tax collection exemption if it builds warehouses within the state.   Pursuant to the bill, distribution facilities built in the state after January 1, 2012 would not create nexus with the state until July 1, 2013, provided that Amazon.com creates at least 1,500 full-time jobs in the state and makes a capital investment exceeding $130 million.

New Jersey Court Affirms Value of Residential Property Where Owner’s Evidence was Insufficient

The New Jersey Tax Court affirmed the value of a residential property established by the assessment after finding that the owner’s evidence regarding comparable sales was insufficient to establish the true market value of the property.  Although the owner overcame the presumption of validity attached to the assessment of his property, he was unable meet his burden of proof with regard to establishing the true market value of the property.

NEW MEXICO

New Mexico Governor Vetoes Combined Reporting Legislation

New Mexico’s Governor vetoed legislation, SB 9, which would have established combined reporting in the state.  The bill would have required combined reporting for multistate retailers with a 30,000 square feet or large facility in New Mexico.  Additionally, it would have lowered the top corporate income tax rate from 7.6 percent to 7.5 percent.

PENNSYLVANIA

Pennsylvania Considers Legislation to Allow Counties to Institute Local Taxes to Reduce or Eliminate Property Tax

The Pennsylvania legislature is considering legislation, HB 2230, which would allow counties in the state to institute a local sales or income tax in order to reduce or eliminate the property tax.  Pursuant to the bill, county governments could ask voters to approve a sales or income tax, which would ultimately provide property tax relief.

Pennsylvania Considers Competing Legislation to Close “Delaware Loophole”

During January, legislation, HB 2150, was introduced that suggested a close to the “Delaware loophole.” For previous coverage of that bill, please click here.  Competing legislation is currently being drafted that will seek to create a broader add-back provision than that contained in HB 2150.

VIRGINIA

Virginia Governor Approves Legislation Phasing in Single-Sales-Factor

Virginia’s Governor has approved legislation, HB 154, which creates a phase-in of single-sales-factor apportionment for retailers.  The bill requires retailers to begin utilizing a triple-weighted sales factor beginning July 1, 2012 and a quadruple-weighted sales factor beginning July 1, 2012.  Finally, a single-sales-factor would be implemented beginning July 1, 2015.

WISCONSIN

Wisconsin Rules that Individual is Responsible for Portion of Company’s Tax Liabilities

The Wisconsin Tax Appeals Commission held that an individual was responsible for a portion of a company’s sales tax and withholding tax liabilities.  The Commission reasoned that the evidence established that the individual maintained the title of president of the company, retained check-writing authority and participated on the board of directors.  As such the Commission found the individual to be a “responsible” person.

Pennsylvania Considering Legislation that Would Amend Corporate Tax and Abolish Delaware Holding Company Loophole

January 31, 2012

  by Stewart Weintraub and Jennifer Weidler

Pennsylvania is now attempting to join the list of states which have challenged the use of the so-called Delaware Loophole.  In the past, other states have challenged the Delaware Loophole by litigation or by legislation.  The legislative remedies involved enacting either combined reporting or disallowing the deduction for the royalty payments.  OnWednesday January 25th, House Bill 2150, Printer’s No. 3019 (“Bill 2150”), was introduced into the Pennsylvania Legislature.  If enacted,Bill 2150 would amend the Pennsylvania Corporate Net Income Tax and address, among other thing, theso-called Delaware Loophole by disallowing the deduction that the parent operating corporation claims for the royalty payments made to its Delaware Holding Company (“DHC”). (more…)