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State and Federal Legislative Update: Internet Sales Tax

April 19, 2019

Following the U.S. Supreme Court’s decision on South Dakota v. Wayfair last summer, states have actively moved to require out-of-state businesses to collect and remit Internet sales taxes via legislation requiring “marketplace facilitators” or “marketplace providers” – such as eBay – to collect and remit tax on sales made by sellers on the eBay Marketplace. States began considering this type of law in 2017, and currently, 24 states and the District of Columbia have enacted laws requiring marketplace facilitators to collect and remit sales tax.  In 2019, eBay has tracked marketplace legislation in 37 states, including several states which had previously enacted marketplace laws. The legislation has taken different forms and, in some cases, established very expedited timeframes for businesses to begin collection. For example, New York recently enacted legislation giving marketplace facilitators less than two months to begin collecting and remitting tax, lending to potential compliance challenges for businesses. As states continue their efforts to establish marketplace collection requirements, eBay will work with lawmakers to promote workable tax policies which provide reasonable small business protections and streamline collecting and remitting standards across the states to avoid confusion, mistakes, and costly penalties.

At the federal level, the U.S. Congress continues to demonstrate interest in a post-Wayfair federal internet sales tax solution. Recently, Representative Jim Sensenbrenner (R-WI) and five of his congressional colleagues introduced bipartisan legislation (H.R. 1933) which would provide a $10 million national small business exemption, prevent retroactive taxation and drive states toward tax simplification structures. Representative Sensenbrenner’s bill awaits further action from the House Judiciary Committee, which has jurisdiction over internet sales tax issues, although quick consideration or passage of any federal legislation related to internet sales tax is unlikely.  We expect similar legislation to be introduced in the Senate in the coming weeks.