United States

Vermont: Proposed Bill Would Adopt Use Tax Notice Requirements for Non-Collecting Vendors

Mar 28, 2016
From KPMG TaxWatch

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Recently, legislation (House Bill 873) was introduced in the Vermont legislature that would require vendors that do not collect Vermont sales and use taxes to report certain information on sales made to in-state purchasers. The proposed use tax notice and reporting requirements are modeled closely after those enacted in Colorado in 2010 that have been the subject of much litigation. Most recently, in DMA v. Brohl, the Tenth Circuit Court of Appeals held that Colorado’s use tax reporting requirements do not discriminate against or unduly burden interstate commerce. On March 22, 2016, DMA petitioned the Tenth Circuit for a rehearing en banc, arguing that the panel failed to fully consider the burdens the reporting requirements impose of retailers engaged in interstate commerce.

Under House Bill 873, each non-collecting vendor making sales into Vermont would be required to adhere to three reporting requirements. First, the non-collecting vendor would be required to inform purchasers at the time a purchase is made that sales or use tax is due on nonexempt purchases and that Vermont requires purchasers to file sales or use tax returns if tax is not collected. Non-collecting vendors that fail to provide this notice would be subject to a penalty of $5.00 for each such failure, unless the vendor can show reasonable cause as to why the notice was not provided. Second, the non-collecting vendor would be required to provide each Vermont purchaser with purchases of over $500.00 in the calendar year a summary of the total dollar amount of purchases made from the non-collecting vendor. This notice would be due by January 31 of each year and would be required to contain certain language and information, such as the dates purchases were made, the amount of each purchase and the category of purchase, if such information is available. A penalty of $10.00 could be imposed for each failure to provide this notice. Finally, non-collecting vendors would be required to file an annual statement by March 1 with the Department of Taxes showing the total amount paid for Vermont purchases by purchasers during the previous calendar year. Only non-collecting vendors with $50,000.00 or more of sales into Vermont in the previous calendar year would be subject to this requirement. Again, unless a taxpayer could show reasonable cause, a $10.00 penalty would be applied for each purchaser that was not included in the statement. The Department of Taxes would be allowed to promulgate rules and forms to implement the use tax reports.

House Bill 873 would also revise the definition of “vendor” to encompass persons that advertise and solicit by various means, including display advertising, catalogues, telephone and Internet, and that make over $100,000.00 of sales to Vermont purchasers or engage in at least 200 sales transactions with in-state purchasers during the previous 12- month period. Please stay tuned to TWIST for future updates on Vermont House Bill 873.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.