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SALT TALK:  Surprise, Surprise, Surprise — Feds May Require Physical Presence on Main Street

Posted by Wayne Berkowitz CPA, J.D., LL.M. on Jul 25, 2016 7:00:00 AM
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Readers, I ask that you close your eyes and imagine a world where the Main Street Fairness Act, or something like it, hasn’t languished since 2010.  That’s right, a warm, sunny, small town kind of place where Weaver’s Department Store never fails to collect and remit the right amount of sales tax.

Now that I have you all in a Zen-like state of calmness, waiving to Andy, Barney, Gomer, and even Aunt Bee, from the old Andy Griffith Show, wake the heck up!  Just because Congressman Jim Sensenbrenner (R-WI) sensibly introduced the No Regulation Without Representation Act of 2016 (H.R. 5893), why would we ever believe that a bill codifying anything remotely related to state taxes could ever move forward?

Regardless of one’s view towards the proposal, we can all be hopeful that some form of federally mandated uniformity won’t vanish once again, just like Barney Fife’s disappearing photo of J. Edgar Hoover[1].

To me, the most fascinating aspect of the bill is the direction given to the states as to what they can’t do, rather than what the states must do to create a level playing field.  The bill directs that in order for a state to require the collection of sales tax, there must be a “physical presence” which is defined as having one of the following activities during a calendar year:

  • Some type of property interest (leasehold or otherwise);
  • Leases or owns tangible personal property (not including computer software) of more than a de minimus value;
  • One or more employees, agents or independent contractors in the State who engage in specific solicitations toward obtaining product or service orders;
  • One or more employees or independent contractors in the State providing design, installation or repair services; or
  • An office in the State which regularly employs three or more employees.

The Bill aims to eliminate judicial uncertainty by setting forth a definition of de minimus presence and handing original jurisdiction to the district courts of the United States to resolve disputes under the law. Whether the Bill moves further through the legislative process is mystery at this point.

Should you have questions about the upshot of the No Regulation Without Representation Act of 2016, contact me at WBerkowitz@berdonllp.com or your Berdon advisor.

Wayne Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, New York Accountants, advises on the unique requirements of governments and municipalities across the nation.

[1] I’ve read, though don’t remember this myself, that in the one episode of the Andy Griffith Show where we get to see Barney’s room at Mrs. Mendelbright’s boarding house, when Barney is kicked out for bringing a hotplate up to his room (no, not Thelma Lou, but a cooking device) a picture of J. Edgar Hoover appears on the wall.  The photo is gone when Mrs. Mendelbright graciously lets Barney move back in.

Topics: SALT TALK

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