A taxing situation: states eye your (online) shopping cart.

• Author: Spendlove, Gretta
• Position: Legal Brief

Do you check out a $1,500 camera at a Utah store and then buy it online to save sales tax? Do you, as a Utah business owner, know your customers are doing that? The online sales tax debate is a loud and feisty drama, with legislation and lawsuits as the past, pending and future acts.

[ILLUSTRATION OMITTED]

Pending Legislation

The Utah Senate passed Senate Bill 226 during the last days of the 2013 legislative session. SB 226 was an "affiliate nexus" bill, designed to broaden the categories of remote sellers (mail order, catalog or online sellers) who must collect tax on sales to Utah residents. Legally, there must be "nexus" between a seller and purchaser's state of residence before the seller can be forced to impose, collect, report and remit sales tax. SB 226 specified that even sellers who do not have a physical presence in Utah themselves could be forced to remit sales tax if they have "affiliates" or "related sellers" who have a physical presence in Utah.

The Senate vote was very close, 15-12, but the bill died when it did not receive House approval. Sen. Wayne Harper, who sponsored SB 226, argued that the bill would help Utah collect tax revenue that it is owed and help local Utah businesses that are losing out to internet sales. Sen. Todd Weiler, who opposed the bill, argued that a lawsuit over the constitutionality of SB 226 would follow its adoption, and that federal legislation on internet sales is nearly here.

On the National Front

The federal Marketplace Fairness Act was introduced in February in the U.S. Senate and House of Representatives. A test vote in the Senate showed bipartisan support for the Act, although there is no certainty when or if it will be enacted.

The Marketplace Fairness Act would grant states the authority to compel online and catalog retailers, no matter where they are located, to collect sales tax at the time of a sale to a resident in their state. It would create a level playing field, for sales tax purposes, for remote and brick-and-mortar sellers. However, before a state could compel a remote seller to pay sales tax, the state must simplify its laws to make multistate sales tax collection administratively less burdensome.

If the Marketplace Fairness Act is adopted, states must either adopt the Streamlined Sales and Use Tax Agreement before they impose sales tax collection responsibility on remote sellers, or simplify their sales tax laws in specified ways. Those changes include notifying sellers, in...