United States

Federal: Legislation Introduced in the House of Representatives that would Codify Quill Physical Presence Standard

Jul 25, 2016
From KPMG TaxWatch

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On July 14, Representative Sensenbrenner of Wisconsin introduced the “No Regulation without Representation Act of 2016.”  If enacted, effective January 1, 2017, this bill (H.R. 5893) would prohibit a state from requiring a person to collect sales or use tax or to report sales unless the person is physically present in the state during the calendar year.  Physical presence  is defined under the Act as owning real or tangible property in the state; having employees, agents or independent contractors in the state specifically soliciting product or service orders from customers in the state; providing design, installation or repair services in the state; or maintaining an office in-state with three or more employees for any purpose.

“Physical presence” specifically excludes having referral agreements with in-state persons who receive commissions for referring customers to the seller, or being physically present in the state for less than 15 days in a taxable year. Having a third-party deliver goods in a state or having Internet advertising services not exclusively directed toward, or exclusively soliciting in-state customers would also not be counted as a physical presence. The bill would make clear— and this is likely in response to recent legislation proposed in certain states attempting to require entities facilitating Internet sales to collect sales and use taxes in lieu of the sellers—that sales tax collection or reporting obligations may only be imposed on purchasers or sellers with a physical presence in the taxing state. The Act would grant U.S. district courts full and original jurisdiction over civil actions to enforce its provisions. Please stay tuned to TWIST for future updates.

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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.