A Sales Tax Fairness Update

The issue of sales tax fairness was prominent in this week’s new reports nationwide. As Amazon.com pushes for another sales tax exemption, this time in New Jersey, states such as Minnesota and Georgia are looking to level the playing field. In addition, ABA Senior Public Policy Analyst David Grogan met with the staff of several senators in Washington, D.C., last week to discuss ABA members’ support of the Marketplace Fairness Act.

Below is a look at the most recent sales tax fairness developments.

Connecticut

On Monday, March 19, the Connecticut Supreme Court ruled that Missouri-based Scholastic Book Club Inc. has sufficient presence in the state to meet the requirements for collecting and remitting sales tax in Connecticut. The ruling overturns a trial court’s ruling.

A Connecticut Department of Revenue Services (DRS) press release noted that the court’s decision is based on the fact that some 14,000 Connecticut classroom teachers “acted as the company’s representatives soliciting, processing, and delivering book sales to students.”

DRS Commissioner Kevin Sullivan said, “Justice Zarella’s careful and thoughtful opinion on behalf of the unanimous court makes clear that the activities of teachers in Connecticut on behalf of this out-of-state bookseller objectively fall well within the scope of acting as sales representatives for purposes of doing taxable business in our state,” which, he noted, “establish sufficient contacts or nexus within Connecticut to uphold taxability.”

Georgia

On Thursday, March 22, the Georgia state Senate voted unanimously to pass H.B. 386, a tax plan that contains a sales tax fairness provision, as reported by the Atlanta Business Chronicle [1]. H.B. 386 was passed by Georgia’s House of Representatives by a vote of 155-9 on Tuesday, as reported by the Atlanta Journal-Constitution [2]. The bill now heads to Governor Nathan Deal for his signature.

The sales tax fairness provision, on page 52 of the legislation [3], clarifies Georgia state sales tax laws so that remote retailers with nexus in the state via online affiliates acting as sales agents in the state must collect and remit sales tax to the state on purchases made by Georgia residents. A remote retailer must make $50,000 per year in annual sales to trigger nexus in the state. It is expected to be considered by the Georgia Senate on March 22.

If signed by the Governor, it is estimated that the legislation would recoup for the state approximately $47.7 million in revenue that otherwise would uncollected, AJC reported [4].

The sales tax fairness provision had met with some opposition from Grover Norquist’s Americans for Tax Reform (ATR), the article noted. Josh Culling, the state affairs manager at ATR, told AJC that the sales tax fairness provision is “stupid.” However, Georgia House Speaker David Ralston, (R-Blue Ridge) said the provision “levels the playing field” for Georgia retailers.

Kansas

SB 371, sales tax fairness legislation, passed the Kansas Senate by a 33-6 vote.  SB 371 would require remote retailers with a broad network of online affiliates in Kansas to collect and remit sales tax to the state. The House is expected to consider the bill next week.

Maine

Last week, Maine Gov. Paul LePage (R) urged Senators Susan Collins and Olympia Snowe to support the Marketplace Fairness Act, federal sales tax fairness legislation that would give states the authority to require remote retailers to collect and remit sales tax if states choose to do so, as reported by the National Journal [5].

In his letter to the senators, LePage wrote: “There’s no denying that passing the bill would give thousands of small Maine businesses a real boost. Through no fault of their own, federal policy now gives some out-of-state corporations an unfair advantage over other Maine retailers.”

Minnesota

A sales tax fairness bill is currently under consideration in Minnesota in both the House and Senate. Most recently, on March 13, SF2082 [6], introduced by Sen. Geoff Michel (R-41), passed the Senate Jobs Committee and was referred to the Senate Taxes Committee [7]. If passed and signed into law, SF2082, like HF1849, would require remote retailers with broad networks of online affiliates acting as sales agents to collect and remit sales tax to the state for purchases made by Minnesota residents. HF1849, sponsored by Rep. Greg Davids (R-31B), was heard in the House Tax Committee in late February.

ABA is calling on its bookstore members in Minnesota to urge their state lawmakers to support SF2082. To make booksellers’ outreach easier, ABA has created a template letter [8] that booksellers can adapt and e-mail or fax to their state legislator. If a bookseller’s lawmaker is a sponsor of the bill, ABA encourages them to thank the legislator for his or her support of Main Street businesses.

Missouri

The Missouri Budget Project (MBP), a nonprofit public policy analysis organization that provides independent research on complex state policy issues and how they impact all Missourians, is urging the state to level the playing field for Main Street retailers, as reported by Public News Service [9]. The Missouri Budget Project issued a report [10] that forecasts the state will face perennial budget shortfalls without new streams of revenue.

Amy Blouin, project director for MBP, told Public News Service, that lawmakers could start fixing the budget by passing sales tax fairness. She noted that revenue from a sales tax fairness provision has the potential to increase as more Missourians shop online. “It may be $16 million in the first year of collections, but over time it would have a significant impact,” she said. “Allowing [Amazon.com] to have a competitive advantage over Missouri-based retailers is just simply not acceptable.”

New Jersey

At present, Amazon.com’s attempt to garner a temporary sales tax exemption in exchange for opening two warehouses in the state and providing jobs appears to be in limbo. While the New Jersey state Assembly passed the bill, which would provide the online retailer with a tax exemption until July 1, 2013, the Senate failed to act on the bill. The legislature is scheduled to break for budget hearings and not reconvene until May, though no schedule has been released as of press time.

On March 8, ABA members Harvey Finkel of Clinton Book Shop [11]in Clinton, New Jersey, and Bill Skees of The Well Read Bookstore [12]in Hawthorne testified at a Senate hearing in opposition to the bill.

“I spoke about the e-fairness issues — how I have to collect sales tax for New Jersey, and if I don’t I’ll be out of business,” Finkel told BTW via e-mail. He told the Senate committee about how his store supports the community, the schools, the churches, the nonprofits, and works with the other businesses. “All we are asking for is to level the playing field, then it’s up to me as a small business owner to determine how best to fight Amazon and other Internet companies that don’t collect,” he said.

Federal Sales Tax Fairness Bills

Last week, ABA Senior Public Policy Analyst David Grogan traveled to Washington, D.C., where he met with the staff of key senators in support of the Marketplace Fairness Act. Grogan met with staff from the offices of Senators John Cornyn (R-TX), Richard G. Lugar (R-IN), Kay Bailey Hutchison (R-TX), John Barrasso (R-WY), John Thune (R-SD), Rob Portman (R-OH), and Patrick J. Toomey (R-PA).

In addition, he had meetings with staff from the offices of Senators Michael Enzi (R-WY), Richard Durbin (R-IL), and Lamar Alexander (R-TN), the co-sponsors of the Marketplace Fairness Act, as well as with staff from Rep. Steve Womack (R-AR)’s office, a co-sponsor of the Marketplace Equity Act.

Grogan said that, among the information gleaned from his meetings, “I was told it’s more important than ever for bookseller members to reach out to their federal lawmakers to schedule face-to-face meetings in support of sales tax fairness at the local, district level.” Booksellers who would like more information about setting up meetings or sales tax fairness in general should contact Grogan at dave@bookweb.org [13].