MAY 2013 NEWS FROM SULLIVAN & ASSOCIATES, PC

Well the Amazon law has spawned a child, and an ugly one at that, The Marketplace Fairness Act. This interesting piece of legislation has been around in one iteration or another for years, and it has now been passed in the United State Senate. There is an old adage in the law, bad facts make bad law. Well in this case, short sighted self-serving Senators make short sighted, unenforceable, unconstitutional, and overburdensome tax law. If this Act passes in the House, and the President signs it, the words quagmire and disaster will take on whole new meanings. The states can’t handle the tax collection responsibilities that they already have and their taxation websites are already labyrinthal and outdated at best. Couple this with the eventual unleashing of various States’ Department of Taxation auditors like locusts across the country, and its going to get ugly. This doesn’t even take into account the timing issue. Do we really think passing this legislation while Obamacare is coming into force and is still a complete unknown is such a good idea? So, I guess burdening small businesses with additional regulatory, collecting, and remitting responsibilities as we pull out of a recession makes sense? Maybe I’m missing something. Have a pleasant May.

The United States Senate Passes The Marketplace Fairness Act, House is Up Next

In a brazen disregard for Constitutional and Supreme Court Law, the Senate has passed the Marketplace Fairness Act. The Act grants States the authority to compel online and catalog retailers (“remote sellers”), no matter where they are located, to collect sales tax at the time of a transaction. As a result, remote sellers will now have same tax collection requirements as brick and mortar businesses UNLESS they meet the small seller exception of less than $1 million in remote sales. This law, if passed, will in effect overturn the 1992 US Supreme Court landmark decision in Quill v. North Dakota, 504 U.S. 298(1992), which held that an out of state corporation must have a physical presence in a state before it can be subject to sales tax collection and remittance responsibilities.

Now keep in mind that there is a caveat, states are only granted this authority after they have simplified their sales tax laws. Only some states have undergone this process to date, and those states that have met the prescribed requirements under this Act can start collecting sales tax 90 days after the bill is signed by the President. S. 336.

Alabama – Corporate Income Tax – New Rule Implements Move from “Costs of Performance” to “Market-Sourcing” of Sales Other than Tangible Personal Property

The Alabama Department of Revenue has now finalized a new rule implementing legislation enacted during 2011 regarding Alabama’s corporate income tax apportionment formula, which amended the sales factor sourcing rule for sales other than sales of tangible personal property to reflect Alabama’s move from “greater costs of performance” to “market sourcing” for taxable years beginning on or after December 31, 2010. Al. Rule 810-27-1-.71.01.

Idaho – Sales Tax – New Law Creates Exemption for Cloud Computing as a Service

A new law excludes from the definition of taxable “tangible personal property” application software accessed over the Internet or through wireless media. “Application software accessed over the Internet or through wireless media” means the right to use computer software where the software is accessed over the Internet or through wireless media from a location owned or maintained by the seller or an agent of the seller and is not loaded and left at the user’s location.

The term does not include such remotely accessed computer software if the primary purpose of such computer software is for entertainment use, or if the vendor of that computer software offers for sale, in a storage media or by an electronic download, to the user’s computer or server, and either directly or through wholesale or retail channels, that same computer software or comparable computer software that performs the same functions. H.B. 243.

Kansas – Sales/Use – New Law Provides Remote Seller “Click-Thru” and Affiliate Nexus Provisions

A new law implements “click-thru” and affiliate nexus provisions for Kansas sales/use tax purposes by expanding the definition of a retailer “doing business” in Kansas for state sales/use tax collection purposes to generally include those retailers that enter into certain agreements with Kansas residents, or with in-state affiliates selling similar products, having an in-state physical location/warehouse or employees/agents, using substantially the same trademarks/trade names, and/or conducting in-state activities that are significantly associated with the retailer’s ability to establish and maintain an in-state market.

Qualifying agreements include those entered into with one or more Kansas residents under which the resident, in exchange for some consideration, directly or indirectly refers potential customers from Kansas so long as the cumulative gross receipts stemming from transactions generated by such references exceed $10,000 during the preceding twelve months. These two new “click-thru” and affiliate nexus presumptions may be rebutted if retailers submit sufficient proof that they do not meet the requirements established in the expanded definition. S.B. 83.

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