On Monday, June 15, Reps. Jason Chaffetz (R-UT) and Steve Womack (R-AR) joined with a bipartisan group of legislators to introduce the Remote Transactions Parity Act (RTPA, H.R. 2775), a bill that gives states the authority to require remote sellers doing $10 million or more in gross annual receipts to collect and remit sales tax to the states. The House bill, which shares similarities to the Marketplace Fairness Act in the Senate, is co-sponsored by Reps. John Conyers (D-MI), Jackie Speier (D-CA), Kristi Noem (R-SD), Steve Stivers (R-OH), Peter Welch (D-VT), and Suzan Delbene (D-WA).
“A broad coalition of large and small businesses, online and brick-and-mortar retailers, and state and local government leaders asked Congress to modernize our nation’s outdated sales tax collection framework,” said Chaffetz in a statement. “RTPA would modernize current law and strike the appropriate balance between sales tax parity and a state’s right to manage tax policy within its borders. This bipartisan legislation was developed as part of an open and transparent process, with input from stakeholders on all sides of the issue. I look forward to working with all members of the House and Senate to return more power to the states and create parity within the retail community.”
Under H.R. 2775, states would be authorized to require remote sellers to collect and remit sales tax to the states so long as the state protects remote sellers from various liabilities stemming from errors and customer lawsuits for overcollection, among other things.
A state can obtain authorization to require collection in two ways: The first is to become or already be a member of the Streamlined Sales and Use Tax Agreement. The second is for the state to implement simplification requirements, which include providing a single entity to handle all sales and use tax administration, return processing, and audits, as well as a single uniform tax base for the state and all localities within the state and free access to national certified software providers.
RTPA also provides a small seller exemption for businesses doing $10 million or less in gross annual receipts in the first year of the law. The threshold for the exemption decreases to $5 million in sales in the second year, $1 million in the third year, and is completely phased out by the fourth year. In addition, sales among related entities are aggregated if they meet certain affiliate requirements in the IRS code or if the related entities are structured with the intent of avoiding the act. The small-seller exemption does not apply to sellers making sales through electronic marketplaces such as eBay.
The Marketplace Fairness Coalition, a diverse group of trade associations and businesses, including the American Booksellers Association, sent a letter to Chaffetz and Womack applauding the introduction of H.R. 2775. In their June 15 letter, the groups said, “As America’s marketplace continues to advance into a multi-channel arena, this legislation is urgently needed to restore a level playing field, thereby allowing our businesses to deliver exciting new goods and services to consumers now and into the future.”