For decades, states have sought ways to get remote (non-present) vendors to collect sales/use tax when they sell to customers in the state. States have been pushing Congress to provide assistance and many have enacted laws to broaden their nexus reach.
I’ve been researching, writing and testifying on this topic for many years. One of my suggestions has been to only let the state and its agencies purchase from vendors that are registered with the state to collect sales tax. That is, if a vendor wants to have the state or any of its agencies be a customer, it must register to collect sales/use tax.
Before California enacted its “Amazon law” in 2011, I always thought it was odd that my employer (the State of California) did not mind that I purchased books, such as for speaker gifts or students, from Amazon. Of course, I paid the use tax since it was on my credit card and then I got reimbursed (perhaps the State paid the tax as well). (And, I’ve been paying my use tax obligations since long before there was even a line on the state income tax form.)
I see that Missouri has a law that any vendor that wants to do business with the state must register to collect use tax even if it has no physical presence in the state. Here is an excerpt from its website:
“Vendors Contracting with the State of Missouri Must Collect and Remit Sales/Use Tax – Any vendor and its affiliates selling tangible personal property to Missouri customers should collect and pay sales or use tax in order to be eligible to receive Missouri state contracts, regardless of whether that vendor or affiliate has nexus with Missouri.”
Why don’t more states do this? It only seems fair and logical – if a vendor wants to do business with the state, one of the requirements should be registering for sales tax. Why should the state do business with a company that doesn’t collect sales tax for the state?
In accordance with Circular 230 Disclosure
Original Source By: Annette Nellen
Annette Nellen, CPA, Esq., is a professor in and director of San Jose State University’s graduate tax program (MST), teaching courses in tax research, accounting methods, property transactions, state taxation, employment tax, ethics, tax policy, tax reform, and high technology tax issues.
Annette is the immediate past chair of the AICPA Individual Taxation Technical Resource Panel and a current member of the Executive Committee of the Tax Section of the California Bar. Annette is a regular contributor to the AICPA Tax Insider and Corporate Taxation Insider e-newsletters. She is the author of BNA Portfolio #533, Amortization of Intangibles.
Annette has testified before the House Ways & Means Committee, Senate Finance Committee, California Assembly Revenue & Taxation Committee, and tax reform commissions and committees on various aspects of federal and state tax reform.
Prior to joining SJSU, Annette was with Ernst & Young and the IRS.
1 comment on “One Logical Way To Get Vendors To Collect Use Tax”
Annette – great point. And this has actually been around in a number of states for years – I think some of the states that have legislation similar to what you mention for MO have had it in place for more than 10 years. Other states that I know have legislation like this include Alabama, California, Connecticut, Georgia, Illinois, Indiana, Kentucky, New Jersey, New York, North Carolina, Virginia and there are probably a few more.
One big issue is that many of the companies that the states are looking to collect the tax are B2C and not B2B so legislation like this wouldn’t result in them having to register.
But, certainly good to point this out to people.
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