Senate Approves Non-Binding Budget Amendment Supporting Imposition of State Use Tax Collection Requirements on Remote Sellers, But Genuine Simplification Still Sorely Needed

On Friday, March 22, the United States Senate approved a non-binding amendment to the Senate budget resolution, by a vote of 75-24. The non-binding amendment expresses support for the adoption of a federal bill authorizing states to impose use tax collection obligations upon out-of-state retailers without regard to whether the retailers have a physical presence in the state. The Senate did not vote on an actual bill specifying the terms on Congressional authorization for expanded state use tax collection authority.

E-commerce vendors and other remote sellers interested in the legislation should contact their representatives in Congress to ensure that any federal bill considered for adoption guarantees meaningful uniformity and simplification of existing state sales and use tax systems. The bill currently before Congress, the so-called Marketplace Fairness Act, fails to include fundamental simplification measures, such as requiring one tax rate per state and uniform tax bases and exemptions, providing for vendor compensation, implementing consistent and coherent sourcing rules for products and services, and harmonizing state sales tax holidays. Readers can find out more about true sales and use tax simplification here.

We will continue to follow developments on federal legislation.

The Perils of Zip Code Collection Reach Massachusetts

On March 11, 2013, the Supreme Court of Massachusetts joined California in prohibiting the collection and retention of customer zip codes by retailers in connection with credit card transactions. In Tyler v. Michaels Stores, Inc., the Court based its decision on Massachusetts General Law ch. 93, § 105(a), which provides that retailers cannot “write, cause to be written, or require that a credit card holder write personal identification information not required by the credit card issuer, on the credit card transaction form.”  Like California, the Massachusetts court interpreted "personal identification information" so broadly as to include mere zip codes.

Background.  In 2011, the Supreme Court of California sent shock waves through the retail industry when it ruled in Pineda v. Williams Sonoma Stores, Inc. that zip codes constituted “personal identification information” under California Civil Code § 1747.08 that could not be collected and retained in connection with credit card transactions except in very limited instances. The prohibition against collection of personal identification information applied even if zip codes were requested, but not required, to complete a purchase. As a result of the decision, retailers selling to California consumers have faced costly class action lawsuits (with claims for as much as $1,000 per violation) even if no actual damages or injury could be shown. And while the Supreme Court of California recently held in Apple, Inc. v. Superior Court, that this prohibition did not apply to online transactions involving digitally downloaded products, the Court was careful to state that it was reserving judgment as to whether it applied to “any other transactions that do not involve in-person, face-to-face interaction between the customer and retailer”—explaining that “we express no view on whether the statute governs mail order or telephone order transactions...”

April 1: BC to Revert to the PST While PEI Implements HST

We post here occasionally about developments in the Canadian tax system to keep our readers aware of important changes and new requirements.

For instance, back in 2011, we wrote that voters in British Columbia had decided to discontinue the Harmonized Sales Tax (HST) and return to the provincial sales tax, or PST. As part of this deharmonization, BC taxpayers had to repay the $1.6 billion of transitional funding received from the federal government. BC officials also had to re-implement the PST. Officials have completed their work and BC will revert back to the PST on April 1. (Taxpayers, of course, will still owe 5% GST on certain goods and services after April 1, as well.) Current PST laws and regulations are all now available on BC’s PST website here. Retailers are also required to register for the PST and can do so online here. Note that even if a business was registered under the prior PST, that business must now re-register.