On August 25, 2016, the Chairman of the House Judiciary Committee, Representative Robert Goodlatte, released a discussion draft of the Online Sales Tax Simplification Act of 2016. In keeping with prior drafts, the goals of this updated draft remain, leveling the playing field for brick and mortar sellers, providing compliance simplification and ensuring tax gets collected on all taxable remote sales. Some of the noteworthy aspects of the draft include, but are not limited to:
- Removing, under certain circumstances, the physical presence requirement set out in Quill v. North Dakota, in which the Supreme Court held that a business must have physical presence in a state before the state could require the business to collect use tax on its behalf,
- Implementing a hybrid-origin approach to sourcing,
- Limiting audits of a seller’s remote sales to the origin state, and
- Limiting the destination-state’s rate for remote sales to a single statewide rate.
The most significant aspect of the draft is the shift to taxation of remote sellers on an origin basis and not the traditional destination based method. It is expected the House will review this draft after members of Congress return from the summer recess on September 6, 2016. Ryan will continue to monitor and provide updates on the Online Sales Tax Simplification Act.