2011 Internet Tax Freedom Year in Review

Your support of the Minnesota campaign for Internet Tax Freedom has paid off.

Starting in July 2010 or earlier, the Streamline Sales Tax organization (SSUTA) introduced the small seller exemption or small seller exception, which exempts both buyers and sellers from collecting tax for member states at various levels, including $500,000.
This is better than the proposed Minnesota Internet Tax Freedom Act level of $250,000.
Better still would be the level federal agencies define as the annual revenue of a small business, $10m. The $10m small seller level is supported by eBay. *

It is important to remember the various interests involved sharply contrast both each other and others in their group.
The interested parties include states that want revenue and small US e-commerce professionals.
Of the 50 revenue-seeking states, some like Texas and possibly Tennessee have foolishly counted on some imaginary revenue boon due to internet sales tax revenue to offset their lack of corporate or income tax.

Note also states rights are often defended not by the revenue-seeking states but by the e-commerce professionals or citizens like you and me.
For example states interested only in revenue might have no interest in preserving state-rights, common sense, constitutionally correct thinking reflected in the 1993 Quill decision because a federal law streamlining sales tax or dictating rates would not only ensure state revenue but share or scapegoat each state's political fallout for a decision to adopt new tax.

One of our accomplishments in highlighting tax freedom is that it is becoming less likely that every state will become a member of SSUTA, supported by the Retailers Association.
Of the 50 states, about 20 have not become member of the SSUTA.
This is important because the SSUTA is sometimes it's own worse enemy when it forgets or delays important legislative components like the small seller exemption.

2011 Tax Freedom bills

Highlights

Durbin finally joined Enzi bill
Enzi bill leaves option to not join. But does it allow SSUTA members to not collect sales tax? If not, MN should withdraw from SSUTA.
Womack may be strong on states rights but the rates are dictated and there are other issues

2011 Tax Freedom bills in order of preference

1)
HR 95 (eBay) http://www.govtrack.us/congress/bill.xpd?bill=hr112-95
Congressman Dan Lungren (R-CA), Congresswoman Zoe Lofgren (D-CA), and 30 cosponsors that reject new Internet tax burdens on small businesses with their bipartisan resolution, H.Res. 95.

2) Enzi SF Marketplace Act http://www.govtrack.us/congress/bill.xpd?bill=s112-1832
(introduced Nov 2011 - includes $500k small seller exception) (Amazon supported)
Durbin came around and finally co-sponsored this bill, lending bi-partisan support.
Downside: Contains streamlined streamline sales tax verbiage, which applies even to those 20 states not members of SSUTA. Starts us down path of standardized internet tax at a level too harmful to too many small businesses. The Small Seller Exemption may actually be a refund, not an exemption. It is uncertain whether SSUTA members can opt out, which is unfair since when most states joined the SSUTA, much of the current SSUTA policy did not exist.

3) Womack Marketplace Equity HR (introduced Oct 2011 - includes 100k default State Small Seller exception and $1m Federal Seller exception)
Complicated. Not good for states rights because it dictates rates.

4) Durbin SF Mainstreet Act (introduced July 2011; 1st to include small seller exception but did not include any detail or the exemption qualification level)


SSUTA 2010 and 5/19/11 amendments including $500k small seller exemption (really a refund?)
http://www.streamlinedsalestax.org/index.php?page=modules
http://www.streamlinedsalestax.org/uploads/downloads/Archive/SSUTA/SSUTA%20As%20Amended%2005-19-11.pdf page 93-94
Compiler’s note: This section was adopted on October 7, 2010 and became effective upon its adoption. 25
Compiler’s note: On December 13, 2010 this section was amended as follows: 26
A. For purposes of this section the term “small remote seller” shall mean a new remote seller which has gross 27 national remote sales of no more

than five million dollars ($5,000,000.00) as calculated pursuant to Section 610 of

this Agreement and shall include sellers which would be “new remote sellers” but for the fact that they had gross 1 national remote sales of less

than five hundred thousand dollars ($500,000.00) as calculated pursuant to Section 2 610 of this Agreement. 3
4
B. Member states shall begin paying compensation to a “new remote seller” upon submission of the seller’s initial 5 return filed after the effective

date of the member state’s authorization for compensation that meets the standards of 6 Section 608. Notwithstanding the rates of compensation

established by a member state pursuant to Section 608, 7 to a "small remote sellers” may elect to receive

twenty percent (20%) of the tax collected and due(except for the compensation amount to be 11 retained by the small remote seller) to a state in a

month not to exceed compensation of eighty-five dollars ($85.00) 12 in any month in lieu of compensation calculated using the rates of compensation

established by a member state 13 pursuant to Section 608. Such election shall be for a six month period beginning with the first month that such 14

seller collects a member state’s tax. After such six month period, the rates used to calculate compensation for such 15 sellers shall be those rates

established by the member state pursuant to Section 608.
20
The increased amount of 16 compensation allowed by this subsection shall be available to a “small remote seller” which begins collecting tax 17 for

a member state within the first 12 months following the date of the member state’s authorization for the 18 collection of taxes on remote sales. 19
A seller subsequently found not to meet the qualifications of a “new small
23 remote seller” may be denied and 21 assessed, including any applicable penalties and interest, for any compensation it was not qualified to

claim. 22
26
The provisions of this section shall apply to each state which is currently a full member of the Agreement and to 24 each state which becomes a full

member of the Agreement after the adoption of this section. 25
B. C. If a member state determines that a "remote seller” had previously been registered in that state, 27 compensation for that seller may be

delayed until the state is required to pay compensation for all “in-state sellers” 28 as set forth in subdivision 3 subsection D of this section
31 ” The remaining subsections were 29 renumbered. 30
Section 610: SMALL SELLER EXCEPTION


*We need to ask each states' revenue dept for statistical sales tax data from companies reporting <> $10m in total sales.
It is currently estimated that 75% of state revenue is from companies reporting <$10m in total sales but I'm not so sure it is that high or that each state is like that.