Roughly three months after the U.S. Supreme Court issued its decision to allow states to require out-of-state merchants to collect and remit local sales tax on goods sold to their residents, Rep. Bob Gibbs (R-Ohio) has introduced legislation that would impose limits on states’ online sales tax bills.
States would not be able to start requiring the collection and remittance of sales taxes from online vendors located out of state until next year under the Protecting Small Business from Burdensome Compliance Costs Act of 2018 that Republican Rep. Bob Gibbs of Ohio introduced last week.
The bill also requires states that want to collect sales tax from out-of-state retailers to:
- Provide a statewide uniform tax rate that cannot be higher than the highest combined rate of all local and state taxes.
- Allow out-of-state merchants to remit sales tax to one location.
- Provide a statewide uniform provision for what items are taxable.
“I’ve heard from many retailers and businesses in my district that conduct a good deal of business online,” Gibbs says in a statement. “While the Supreme Court’s ruling levels the playing field, it is another example of a government action having unintended consequences. The Wayfair decision opened the door for a complex web of state and local sales taxes that would be impossible for small businesses to navigate. Complying with a needlessly convoluted tax structure will raise prices for consumers. My bill balances the rights of states to collect tax on online sales while protecting consumers and small businesses from facing an undue burden.”
The bill is the second bill to emerge in the aftermath of the Wayfair decision. However, it is unlikely to pass, says Scott Peterson, vice president of U.S. tax policy and government relations at tax automation vendor Avalara. And, even if it did pass, its impact would be minimal given that it is unlikely to be debated before nearly a one-third of the country will have online sales tax laws in effect. “That defeats the purpose of an effective date,” he says.