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Andrew Johnson, Peisner JohnsonStates are looking to Colorado law regarding use tax owed by out-of-state purchases as a lever to spur vendors to collect sales tax from online sales. Moreover, a panel at sales-and-use tax software vendor Avalara's recent Crush conference speculated Amazon's decision to collect sales tax in all states may have the same impact.

Colorado's requirement, which kicks in on July 1, requires vendors that sell at least $100,000 in the state to notify those out-of-state residents who purchase at least $500 a year that they must pay the state's use tax. The use tax rate of 2.9 percent is the same as its sales tax rate.

"I think this new approach has some legs," Andrew Johnson said during a panel discussion at the Avalara conference. Johnson is a founding partner of Peisner Johnson, a Dallas, Texas-based CPA firm that specializes in state tax consulting.

The Colorado law was enacted in 2010 but could not be put into effect until it survived court challenges. That happened in December when the Supreme Court declined to hear an appeal by direct marketers in which a lower court found the law constitutional.

Vermont has a similar requirement with a use tax rate of 6 percent that is the same as its sales tax levy. The state tied the effective date for collection to the outcome of the legal challenge to the Colorado law to it also goes into effect July 1.  Kentucky, Louisiana, Oklahoma and South Dakota have also enacted notification laws.

The Colorado law has teeth. It requires the vendors who meet sales thresholds to notify the consumers of their annual purchases and their obligation to pay the use tax. Those who fail to file the report can be fined $10 for each failure to file the annual report with the Colorado Department of Revenue at $5 for each failure to send notice to customers. Vermont has similar penalty requirements.

One trigger is expected to be vendor unwillingness to field the volume of calls from customers who receive such notices, combined with that $15 per customer charge. Johnson said the approach makes the seller "the bad guy" in the process.

"If I put this notice on my invoices, am I ready to take all these phone calls?" he continued. Most vendors, Johnson believes, will decide "I am going to start paying tax in Colorado and Vermont."

Now that the law is in effect, other states are eying the approach. Alabama, Arkansas, Hawaii, Pennsylvania and Washington are considering bills.

Johnson sees the Amazon decision, combined with proposed laws that would impact platform vendors such as eBay and Overstock, as tipping the merchant community toward collecting sales taxes. With Amazon collecting the taxes, "Everyone else is going to flip," he said.

 

Bob Scott
Bob Scott has provided information to the tax and accounting community since 1991, first as technology editor of Accounting Today, and from 1997 through 2009 as editor of its sister publication, Accounting Technology. He is known throughout the industry for his depth of knowledge and for his high journalistic standards.  Scott has made frequent appearances as a speaker, moderator and panelist and events serving tax and accounting professionals. He  has a strong background in computer journalism as an editor with two former trade publications, Computer+Software News and MIS Week and spent several years with weekly and daily newspapers in Morris County New Jersey prior to that.  A graduate of Indiana University with a degree in journalism, Bob is a native of Madison, Ind
Last modified on Monday, 05 February 2018
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