“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair,....., in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.”
And like this quote, from Charles Dicken’s “A Tale of Two Cities”, I bring you today “A Tale of Two States”. One for whom the battle was too great, who realized it had expected too much, too quickly; and another just embarking on the dream of internet sales tax collections. Two states. Within a day of each other, one repeals its “Amazon Law”, while another introduces “Amazon” legislation.
California’s “Amazon Law” is Temporarily Repealed
Okay, so we knew it would probably happen! That's right, just in case you haven’t heard, California’s Governor Brown signed compromise legislation, AB 155, into law on September 23, 2011. And just in case you’re visiting the SalesTaxSupport.com blog for the first time today and aren’t familiar with these developments, I invite you to read my recent post “Amazon Law (& Order). The California Season Summary…”, for the dramatic details that led to the “California-Amazon” compromise.
Although I cover the provisions of AB 155 in that post, I’ll summarize a few key points here:
- AB 155 temporarily and retroactively repeals the provisions of ABX 1, California’s “Amazon Law”.
- This repeal will remain in effect until either September 15, 2012 or January 1, 2013 depending on whether a federal solution is passed by July 31, 2012, and if passed, depending on whether California elects to implement the federal solution. (I’ve seen many news reports that simply state that sales tax will not be due on internet purchases until September 15, 2012 but fail to mention the possibility that the repeal may last until January 1, 2013.)
- This repeal impacts all out-of-state (“remote”) retailers, not just Amazon.com, and gives these on-line retailers a temporary reprieve from collecting sales tax from California purchasers.
Although the press coverage has slowed on the “California-Amazon” saga, the latest reports are that Amazon has officially confirmed that it will indeed begin collecting sales tax no later 2013. This recent Wall Street Journal article, “Amazon to Collect Sales Tax by 2013”, quotes Jeff Bezos, Amazon’s CEO, as saying that Amazon will begin collecting sales tax by 2013. He also confirms that Amazon plans to add facilities in California and that the Company will not challenge the law or close its facilities to avoid its sales tax collection requirement. I suppose for now, we’ll just have to wait and see what really happens!
Michigan Introduces “Amazon Legislation”
Now with all the time, effort, energy and taxpayer resources spent on California’s failed attempt to get its “Amazon Law” in effect and enforceable immediately, you would think other states might think twice about introducing “Amazon” legislation.
Not so, my friends. On September 22nd, Michigan became the latest state to introduce “Amazon” legislation. Michigan H.B. 5004, contains the typical, web-linking nexus language seen in other "Amazon Laws” and states that a seller "is presumed to be engaged in the business of making sales at retail of tangible personal property in this state if the seller enters into an agreement with 1 or more residents of this state under which the resident, for a commission or other consideration, directly, or indirectly refers potential customers, whether by a link on an internet website, in-person oral presentation, or otherwise, to the seller, if the cumulative, gross receipts from sales by the seller to customers in this state who are referred to the seller by all residents of this state with such an agreement with the seller is greater than $10,000 during the immediately preceding 12 months.”
But Michigan H.B. 5004 also includes "affiliate nexus" language, further expanding the definition of a “retailer engaged in business of making sales at retail” to include retailers who are part of a controlled group, as defined in I.R.C. 1563(A), that include “affiliates” (controlled group members) with facilities and employees in the state that perform various types of services (advertising, delivery, installation, maintenance, etc.) which promote or facilitate a remote retailer’s Michigan sales, or which use trademarks and similar intangibles in Michigan that are substantially similar to those used by the remote retailer, or which allow the remote retailer’s customers to pick-up or return on-line purchased merchandise from an affiliate’s Michigan facility, or which conduct any significant “market enhancing” activity in Michigan that benefits the remote retailer. Expansive indeed!
A few more points on Michigan’s “Amazon” legislation; the legislation contains a “rebuttable” provision, and if passed, Michigan’s “Amazon Law” would go into effect 30 days after the legislation is enacted.
In conclusion, here’s one more interesting note on the Michigan development. Michigan, unlike California, is a full-member Streamlined Sales & Use Tax Agreement (“SSUTA”) state. As I explained in a recent post on the federal Main Street Fairness legislation, if enacted, the federal Main Street legislation would grant full-member SSUTA states the legal authority to require remote retailers (other than those meeting the small seller exception) to charge and collect sales tax. (For more on the federal Main Street Fairness legislation, see my 8/10/11 post, “Main Street Fairness Act. Is SST the Silver Bullet?") As I’ve mentioned before, the federal Main Street Legislation would not impose a national sales tax (as some media reports imply), and so a federal law could operate in conjunction with independent state “Amazon Laws”. But if a state is already a SSUTA full-member, having a separate “Amazon Law” might seem redundant. California, on the other hand, would need to apply for and become a SSUTA member in order to enjoy the benefits of the federal Main Street legislation. So why are states continuing on this trend? They need the sales tax revenues – no question about that! Perhaps they just can’t sit back and wait for a federal solution. One thing that is certain, it will be interesting indeed to see how things play out over the next year! It's sure to be a novel worthy ending!
Missed my last post? Catch it here, “Amazon Law (& Order). The California Season Summary…”
What’s up next? An Overview of Affiliate Marketing and How “Amazon Laws” Affect Small-Medium Businesses, More Updates on States “Amazon Laws” (exact titles TBD)
Other recent “Internet Tax / E-Commerce” posts by Sylvia F. Dion, CPA:
- States Follow South Dakota: A By-State Guide on Economic Nexus
- With Wayfair Decided, Is a Federal Solution Still Needed?
- Amazon and Other "Nexus Expanding" Laws - By State Summary
- Economic Nexus: The “New Normal” or the Demise of Quill?
- Remote Transactions Parity Act: Comparing RTPA to MFA