Wednesday, September 28, 2011

Wondering How Sales Tax Applies to a Groupon? Massachusetts Issues Draft Guidance

Image: Groupon Webpage on
Massachusetts Deals
This past June, I wrote a post entitled Wondering How Sales Tax Applies to a Groupon? So Are Many of The States”.  If you’re a frequent visitor to The State and Local Tax “Buzz”, my guess is you’ve read this post as it’s become the most popular blog post I’ve published to date.

As you probably guessed from the title of that post, the key point I highlighted is that much uncertainty has existed regarding the sales tax implications of third-party e-coupon discounts, such as those marketing and arranged by companies like Groupon and LivingSocial. Specifically, I addressed whether states allow Groupon type discounts to impact sales price in the same manner as manufacturer’s or retailer’s discounts, as well as whether the nature of the Groupon type arrangement impacts the amount subject to sales tax as these promotions are not all identical. (In some promotions a consumer purchases a specific product or service, while in others, a consumer has purchased a “cash equivalent” which may be tendered as payment when choosing from the participating retailer’s offerings.) In my prior post, I also highlighted that state officials have been taking great interest in these third party e-coupon programs, but many states had not yet issued definitive guidance on how they impact sales price as their current regulations on the taxation of discounted merchandise did not appear to cover the Groupon model.

Massachusetts Issues Working Draft Directive 11-XX:
As states begin to address this issue, we may soon see this uncertainly evaporate. On September 16, 2011, Massachusetts became one of the first states to publicly address the sales tax implications of third party e-coupon discounts.  The Department of Revenue's ("the Department") temporary guidance is articulated in Working Draft Directive 11-XX, Application of Sales Tax to Sales and Redemption of Third Party Coupons.
This Working Draft Directive clearly identifies the promotional arrangements to which it applies as those “known under various names in the marketplace including Groupon, LivingSocial and BuyWithMe.” The two issues addressed in Draft Directive11-XX include:

  1. Whether the sale of a third party e-coupon certificate is subject to sales or use tax. That is, whether the sale of the actual e-voucher which may be redeemed (at a future point) at face value for taxable property or meals is subject to sales tax.
  2. What value should be used to determine the amount subject to sales tax when taxable personal property or meals are purchased using a third party e-coupon certificate. Specifically, this second issue deals with the impact of these third party e-coupon discounts on the sales price subject to sales tax.  
Regarding the first point, Draft Directive 11-XX confirms that tax is not due upon the sale of the e-coupon certificate, stating that the sale of e-coupon certificates should be treated, for sales tax purposes, in the same manner as gift certificates issued by a vendor. Effectively, this means that at the point in time when Groupon or other e-coupon vendor charges a customer’s credit card, the transaction is the equivalent of a gift certificate sale even if the customer is purchasing a specific taxable product or service.
On the second issue, Draft Directive 11-XX first explains Massachusetts' current rule on the impact of manufacturer’s and retailer’s discounts on sales price as detailed in the Massachusetts sales tax regulations. The Draft Directive states that while the Massachusetts regulation on discounts and coupons allows both manufacturer’s and retailer’s discounts to reduce the sales price subject to tax, the Massachusetts regulation also states that “other types of coupons will not be treated as cash discounts”. (See 830 CMR 64H.1.4 Discounts, Coupons and Rebates)

Draft Directive 11-XX then concludes that a “certificate or coupon issued by a third party as described in this Directive does not qualify as a manufacturer’s or retailer’s coupon because it is neither issued by the manufacturer nor the retailer…”, and further adds that “A third party certificate is therefore not treated as a cash discount that reduces the taxable sales price.”

To illustrate the application of these rules, Draft Directive 11-XX includes two examples. The first example details a scenario in which a consumer purchases an e-certificate for $20.00 which can be applied towards a $40.00 restaurant meal (i.e., the consumer will be able to choose from the restaurant's offering and tender the e-certificate as payment). The Draft Directive states that state and local sales tax will be due on the full $40.00 value of the meal. In the second scenario, a consumer purchases a $280.00 golf package for $140.00. The package includes non-taxable green fees normally valued at $200.00 and a taxable golf cart rental fee normally valued at $80.00.  The Draft Directives states that the golf course must collect and remit sales tax on the full $80.00 value of the taxable golf cart rental fee.  Note that while Draft Directive 11-XX is indicative of the Department’s position on the treatment of third party e-coupon discounts, it is at this time still a Working Draft Directive and subject to change.

Additional Commentary
While authoring my prior Groupon post, I reached out to the Massachusetts Rules and Regulations Bureau (the department within the Legal Division which interprets the statute and authors regulations and administrative guidance) because my research found limited authoritative guidance on Massachusetts’ position on e-certificate discounts. The Bureau’s response to my question came to me in the form of a Private Information Letter (“PIL”) (See Note A), which confirmed that the Department had not issued formal public guidance on Groupon type arrangements, stating that the Bureau had yet to receive a fully documented ruling request as required by the Massachusetts administrative provisions. The PIL added that without a formal ruling request detailing the specifics of these arrangements, the Bureau lacked sufficient information as to exactly how these promotions work and if they all work in the same way. Despite this statement, the response also stated that the Bureau did not believe that Groupon certificates qualified as retailer's or manufacturer's coupons, which do reduce the taxable sales price in accordance with the Massachusetts sales tax rules. The Department's position in the PIL I received is consistent with the Department's position articulated in Draft Directive 11-XX
One point in the PIL, which was not addressed in Draft Directive 11-XX, was a discussion of “sales price”. The PIL noted that the “sales price” issue was discussed at the May 2011 Streamlined Sales Tax Governing Board meeting, and that although a consensus was not reached during the May meeting, Massachusetts would certainly take into account any “sales price” conclusion (once reached) even though Massachusetts is not currently a streamlined conforming state. (See Note B)
As I just noted my preliminary Massachusetts research on this issue uncovered limited guidance. One document I discovered was another PIL issued by the Bureau in March of 2010. That particular PIL describes a scenario which is virtually identical to the scenario described in the first example in Working Draft Directive 11-XX, however, in the March 2010 PIL, the Bureau advises that sales tax would be due on the discounted amount the customer paid for the e-certificate, not the full value of the meal received. (See Massachusetts Private Information Letter issued to Ben Edelman dated March 30, 2010)
Despite the fact that the the March 2010 PIL clearly states that the PIL "provides general guidance only" and "is not binding on a taxpayer or the Department", this "guidance" has been referenced or cited in numerous articles that have focused on Groupon's Consumer Protection Law "violations" which have included claims that Groupon has been advising merchants to overcollect sales tax. (See "Daily Deal Providers May be Violating Consumer Protection Law", TechCrunch, 6/15/2010; "Groupon's legal risks and hidden gift to merchants", Reuters, 6/16/11 - see also link in the Reuter's article to Ben Edelman blogpost "Consumer Protection in Online Discount Voucher Sales", 6/14/11)  
Sylvia's Summation
States are becoming more and more aware of the need to address the impact of e-coupon discounts on taxable sales price. Massachusetts has recently articulated it's position in WorkingDraft Directive 11-XX, stating that e-coupons discounts do not reduce the amount subject to sales tax. Keep in mind that until the Department issues its position in a final Department of Revenue Directive, this guidance is temporary as the Department is currently accepting practitioner and taxpayer comments which may lead the Department to revise this draft guidance. Taxpayers and tax practitioners should also be aware that the media has published stories which relied on information in a March 2010 PIL which was not binding on the Department. Taxpayers considering marketing their products or services through Groupon, LivingSocial, BuyWithMe or other third party e-coupon marketer should carefully consider the sales tax implications and consult with their tax advisor in order to understand their responsibility to collect and remit the proper amount of sales tax. (See Note C.)


Note A:  The e-mail response received from the Massachusetts Department of Revenue's (DOR) Rules and Regulations Bureau is what is referred to as an "Information Letter" (as defined in Letter Ruling Regulation, 830 CMR 62C.3.2.)  It is intended to provide general information such as the potential applicability of DOR public written statements or well-established principles of tax law, but it is not intended to provide authoritative guidance on the application of the tax laws to a specific set of facts, therefore, it is not a "ruling" or "letter ruling" that is legally binding on the DOR.
Note B:  On 8/15/11, the Massachusetts Joint Committee on Revenue reported favorably on H. 3763, An Act to Promote Sales Tax Fairness for Main Street Retailers, which gives the Commissioner authority to petition the SST Governing Board to allow the Commonwealth to become an associate or full member.  This bill was referred to the Joint Committee on Rules, which re-convenes on 11/19/11. 
Note C:  Other states which have recently issued guidance on the sales tax implications of Groupon type discounts include California (Tax Information Bulletin, September 2011) and New York (TSB-M-11(16)S, 9/16/11).  My plan is to author a subsequent post once Massachusetts issues a final directive, which will discuss guidance from every state that has issued final guidance at that point.  

Tuesday, September 27, 2011

State Mandatory Combined Reporting: Complex Formula or 'Loophole' Closer?

State Mandatory Combined Reporting! You're probably wondering what this obscure state tax concept means and whether it impacts your company's state corporate taxes. Before jumping into today's discussion, here are a few questions to consider.

Is your company a subsidiary or affiliate within a "controlled group" of corporations? Do any of the "controlled group" corporations do business in multiple states? Are you considering selling a majority interest in your company to another corporation which does business or in multiple states or has subsidiaries with multi-state operations? Is the prospective buyer a vendor, supplier or otherwise integrated with your corporation? Have you been advised to reorganize your corporate structure and create new legal entities? Will this reorganization involve transferring intangible assets, such as technology, trademarks or patents; to a new legal entity and having related corporations compensate each other for the use of those assets? 

If you answered yes to any of these questions, understanding state mandatory combined reporting is important as this filing method, employed by many states, could have a significant impact on your company's state corporate tax liability. 

A few years ago, mandatory combined reporting became a "hot button" issue when it was discovered that many large corporations were significantly reducing their state tax bills by exploiting "creative" restructuring techniques. More on that in a bit!

What the Heck IS State Mandatory Combined Reporting Anyway?

Unless you're a tax or legal professional, there's a good chance you've never even heard of state mandatory combined reporting. Actually, unless they frequently deal with state tax issues, many CPAs and tax attorneys don't completely understand it. 

In a nutshell, it's a filing method required in many states, in which multiple related corporations are taxed as a single corporate taxpayer. (Technically, it's an apportionment methodology....blah, blah - but let's keep it simple!) 

In states that require or "mandate" combined reporting, the taxable income of a group of related corporations which meet certain criteria is aggregated and this total combined group income is subject to the state's corporate income or equivalent business tax. While this may sound benign, the impact of combined reporting may seem harsher when you consider that only one corporation in the related group with "nexus" to the taxing state pulls in all the other related corporations even if those corporation do not engage in business in the combined reporting state. In some combined reporting states, even non-U.S. (foreign) corporations that meet certain thresholds are required to file as part of the combined group.  

What are some of the criteria that could cause a group of related corporations to have to file on a "combined basis"? Though every state has its own requirements, in general, corporations that are related by ownership (e.g., a common parent owns more than 50% of the voting control or value of its subsidiaries) and are interrelated or interdependent with each other would meet the criteria for mandatory combined filing. This connection and interdependence between the related corporations is referred to as a "unitary" business relationship. For this reason, mandatory combined reporting is often referred as "unitary" reporting or the filing a "unitary" return. In general, if a controlled group of corporations are functionally integrated, have centralized management, and enjoy economies of scale, the controlled group is deemed to be "unitary". 

An example might include a group of commonly owned corporations in which the management team is employed by the parent corporation and the subsidiaries perform various "steps" in a process. (e.g., one corporation designs and manufacturers a component part which is used in the product of a related corporation who then sells the finished product to yet another related corporation who then distributes the final product to end users.)

Why Have State's Shown an Interest in Enacting State Combined Reporting Laws in Recent Years?

Here's an interesting note - between 1985 and 2004, not a single state enacted a mandatory combined reporting law. That's right, for almost 20 years, combined reporting wasn't a hot state issue! So what happened? Beginning in the 1990's and into the beginning of this millennium, large corporate taxpayers got aggressive in their tax planning and began taking advantage of "loopholes" that allowed them to greatly reduce their state corporate taxes. 

Though several variations of these "tax planning" strategies evolved, the general idea involved splitting up a single corporation into multiple corporations. Along with this "reorganization", various assets were transferred to new corporations and "inter-company agreements" were created that required the related corporations to pay one another for use of the assets. Because state corporate rates vary from state to state, the overall corporate group could ensure, by dictating the flow of income and expenses between the corporate group members, that the corporations that earned the highest income filed mostly in states with low rates or no corporate tax, while the corporations with the lowest income filed elsewhere. Because each of these corporations were separate legal entities, only the activity of that specific entity would be taxed in "separate reporting" states - those that tax only the activity of the specific legal entity doing business in, or having "nexus" to, their state.

It wasn't long before these "strategies", and the large corporations abusing them, were exposed. In 2007, The Wall Street Journal published a scathing report which revealed how Wal-Mart avoided approximately $350 million in state taxes over four years by transferring all of its real estate (stores) to a Real Estate Investment Trust (REIT), an entity which often pays little to no tax. By having the stores pay rent to the REIT, Wal-Mart was able to create huge deductions which reduced its overall state taxes, while paying little to no tax on the rent income earned by the REIT. (See "Wal-Mart Cuts Taxes By Paying Rent to Itself", WSJ, 2/1/07)

A similar strategy involved transferring trademarks or trade-names to a newly created entity that would in turn charge an inter-company fee for use of those intangibles. These royalty or intangible holding companies (IHCs) were often incorporated in low or no corporate tax states, such as Delaware or Nevada. Like the Wal-Mart REIT strategy, the stores received huge royalty expense deductions which in turn greatly reduced their state taxable income, while the royalty or IHC paid little to no tax. Name just about any mega retail chain - Toys "R" Us, The Gap, Home Depot, Wal-Mart - and it's was good bet they had (or still have) one of these tax planning "strategies" in place.

Eventually states realized these arrangements were draining state revenues and attempted to apply "band-aid" approaches, such as enacting laws that disallowed these "tax planning" deductions. When these approaches were less than effective, more and more states began to realize that enacting mandatory combined reporting was the best approach to closing this "loophole". With combined reporting, those questionable tax-planning deductions that reduced state taxes in separate reporting states were eliminated, as collapsing the combined group members into one reporting entity meant that the income and expense deductions would now offset each other. 

Sylvia's Summation

Although mandatory combined reporting has proven to be an effective approach to closing certain state tax abuses, it is not without criticism. For one, combined reporting laws are extremely complex!! They require analysis of which entities must be included in the combined group, a determination of what proportion of the group's total combined income should be taxed in that state ("apportionment"), how to treat corporations that become or cease to become combined group members (such as through an acquisition or divestiture), and how losses and credits generated by individual group members are shared (See Note A). And although these laws were intended to target the mega-corporate abusers, any controlled group, regardless of its size, that meets the requirements to file combined basis must do so in mandatory states.

So which states have mandatory combined reporting laws? As of the beginning of 2011, they are...(drumroll please!):  Alaska, Arizona, California, Colorado, Hawaii, Idaho, Illinois, Kansas, Maine, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, New York, North Dakota, Ohio, Oregon, Texas, Utah, Vermont,  Wisconsin, and the District of Columbia.

State mandatory combined reporting. Complex! And I've only touched on the basics! So if you're concerned about its impact on your business, seek guidance from a CPA, attorney or consultant that specializes in state taxes (such as your author here, wink!).

(Note A: Want to a little more sense of just how complex mandatory combined reporting can be? See my prior "Buzz" post, "Massachusetts Department of  Revenue Offers an Opportunity to Withdraw 'Binding' 2009 Worldwide or Affiliated Group Election".)


The above post was authored by me, Sylvia Dion, for, and was published on on 9/29/11. It has been reproduced here at The State and Local Tax "Buzz" for the benefit of the "Buzz" readers. See my "Contributions to Other Blogs" webpage for a full listing of all of my contributions.

Sunday, September 18, 2011

Hot Topics in State Taxation: The Third Annual Northeast SALT Forum

"Hot Topics in Sales & Use Tax: What is Changing? How National Sales Tax Trends and Events Impact the Northeast"
"Taxing Online Transactions"
"The Top Ten Relationship Killers:  Recurring Scenarios in State Tax and How to Deal with Them Effectively"
"Flow-Through Entities: The Unwritten Rules"
"Business Tax Reform:  Raising National Interest Toward a Value Added Tax"

If these topics have peaked your interest, consider attending the Third Annual Northeast State & Local Tax Forum, to be held on November 10, 2011 at the Westford Regency Inn and Conference Center in Westford, Massachusetts, a beautiful, colonial town approximately 1 hour outside of Boston.  

This one-day forum, sponsored by the New Hampshire Society of Certified Public Accountants, will feature some of the leading State & Local Tax minds from New England and the nation, including:
  • Scott Peterson, Executive Director of the Streamlined Sales Tax Governing Board
  • Harley Duncan, Managing Director, Washington National Tax Office of KPMG, LLP
  • James (Jim) Eads, Esquire, Director of Public Affairs for Ryan, LLC and former Executive Director of the Federation of Tax Administrators
Plus many more State & Local Tax ("SALT") experts from several of the "Big 4" accounting firms and premier regional and national law firms.  These experienced SALT practitioners will address key technical and policy issues and provide an annual update on significant SALT developments from across the country, with a particular focus on New England.

The State & Local Tax Forum was the brainchild of a group of New England SALT leaders who, recognizing that a technically focused, in-depth SALT conference, was not offered in the New England area, decided to create the Northeast State & Local Tax Forum and bring together renown SALT experts to present on the latest "Hot Topics" in State Taxation.

Whether you're a SALT practitioner based in New England or anywhere in the country, you won't want to miss this innovative and thought provoking conference.

I know I'll be there!

More information on the Forum's agenda, speakers, venue and Advisory Committee can be found at this link to the Third Annual Northeast State & Local Tax Forum's brochure. Register for the Forum by detaching and mailing the registration tab found at the bottom of the brochure, or through the New Hampshire Society of CPA's seminar webpage.  


Updates and Additional Information:

  • Are you a member of another State CPA Society?  Per discussions with the New Hampshire Society of CPAs, the sponsoring organization, members of any State CPA Society are entitled to the reduced New Hampshire CPA society rate.
  • Are you an attorney? Per discussions with the New Hampshire Society of CPAs, the Forum qualifies for both CLE and CPE.  Contact the society at (603) 622-1999 for additional questions.
  • Considering an overnight stay? The Westford Regency Inn & Conference Center has a limited number of discounted rooms available. Contact the Inn at (978) 692-8200 for availability.  Additional Westford hotels include the Residence Inn by Marriott, (978) 392-1407 (walking distance - across the street); and the Hampton Inn & Suites, (978) 392-1555 (1 mile away).

Friday, September 16, 2011

California's "Amazon Law" Drama Continues: An Update on Recent Developments

Following a series of events that rival the drama, suspense and negotiating seen on prime-time TV, it appears as though California’s “Amazon Law” may soon be no more!  At least temporarily, that is!  But before discussing the latest developments, let’s go back to where this drama began.

If you caught my original post on California’s “Amazon Law”, you’re probably not surprised by the sequence of events that have transpired as this law was destined for controversy right from the start! As if I had crystal ball, my concluding thoughts in that post were, “like a well-written soap-opera, this story is one that will go on for some time.  Don’t touch that dial – you won’t want to miss what happens next in this California “Amazon Law” story.” (See my prior post, “California Enacts Explosive ‘Amazon Law’! ”)

And without a doubt, this drama has lived up its preview!

What was it about California’s “Amazon Law” (ABX1 28) that made it prime for drama?  On one hand, California’s law contained the same presumptive-nexus, “web-linking” language found in the “Amazon Laws” enacted in other states.  But ABX1 28 went beyond the typical web-linking language by expanding the definition of a “retailer engaged in business” in California to include retailers that were members of a commonly-controlled/California combined reporting group which also included corporate members that performed in-state services in connection with the tangible personal property to be sold by the out-of-state retailer. (e.g., design, development, fulfillment) Still, it wasn’t so much the language in ABX1 28 that fueled this drama, as what was at stake for both California and Amazon.

So where did all the drama begin?  First, ABX1 28 became effective on July 1, 2011, almost as soon as Governor Brown signed it into law.  But even before the ink was dry on Governor Brown’s signature, Amazon had informed its 10,000 plus marketing affiliates (“Amazon Associates”) that it would terminate their contracts and would no longer compensate them for referrals that came through web-links on their websites.  For some California affiliates, this would translate into a huge loss of revenue, and California companies, such as Santa-Monica based, began exploring the possibility of relocating elsewhere. (“ The California Internet Tax Law and Unintended Consequences”,, 6/30/11)

Next came Amazon’s (and Overstock’s) blatant refusal to comply.  Despite the new law’s expansive nexus language and immediate effective date, both e-tailers thumbed their nose at it and refused to charge their California customers sales tax.  California tax officials didn’t seem totally surprised. When asked about her thoughts on this development, Betty Yee, a California Board of Equalization member, was quoted as saying “They’re not intending to comply, by all indications. So, we’ll bill them at the end of this quarter, based on estimates either they provide or we come up with from other data sources. Then, if they don’t come forward and pay, we’ll consider other courses of action”. (“Amazon, Overstock thumb nose at California tax”, SFGate, 7/3/11)

Then just days after the new law’s effective date, it was revealed that Amazon was already planning its next course of action – a voter referendum which would allow California voters to decide whether the law should be repealed permanently!  Amazon was given until September 27th to gather approximately 505,000 signatures – obtaining these would suspend the law and make it unenforceable until after a ballot vote in June of 2012.  In the weeks that followed the petition’s approval, Amazon was criticized for gathering signatures literally on the front steps of its brick-and-mortar competitors, as well as for pumping in more than $5 million towards its “More Jobs Not Taxes” referendum. (“Amazon gathering anti-tax-law signatures outside retail stores”, LA Times, 8/6/11.  “Amazon ups the ante in Internet sales tax fight”, LA Times, 8/23/11)

As it became evident that Amazon’s petition efforts would prove successful (reports were that Amazon would have the 500,000 plus signatures well before the September 27th deadline), and California began to realize the potential loss of the $200 million that had been anticipated to materialize once Amazon and other on-line retailers were required to assume the role of sales tax collectors, tax legislators took unusual and extreme action.  They re-wrote the law under an “urgency” clause.  If the urgency bill had passed, it would have trumped Amazon’s efforts towards a voter referendum – but the bill failed, by just five votes, to garner the two-thirds votes required for the bill to pass.  (“In California, Amazon Pushes Hard to Kill a Tax”, New York Times, 9/4/11)

But Amazon didn’t just sit back casually and wait for the outcome.  As it had done in other states, Amazon offered a negotiation package that included building distribution centers that would employ thousands of Californians and dropping its referendum efforts in exchange for postponing the new law’s sales tax collection requirement until 2014.  When California’s Democratic legislators weren’t impressed, the offer was rejected.

AB 155 – A Compromise Solution

What happened next emphasizes just how important it was for both California and Amazon to reach a compromise.  In the very last hour of the 2011 legislative session California legislators, by an overwhelming majority, voted in favor of AB 155, a compromise bill.  The highlight of AB 155, which modifies California Revenue and Taxation Code Sec. 6203, is that it temporarily and retroactively repeals the nexus expanding provisions of ABX1 28!  How long this repeal will last – or should I say, how long before Amazon and other remote retailers that meet certain thresholds have before they are required to start collecting sales tax – depends on several factors; 1) whether federal legislation, such as the Main Street Fairness Act now pending in Congress, is passed, 2) when federal legislation is passed, and 3) whether California elects to implement an enacted federal solution.  More specifically:

  • If federal legislation authorizing the states to require a seller to collect taxes on sales of goods to in-state purchasers without regard to the location of the seller is enacted by July 31, 2012, and California does not, by September 14, 2012, elect to implement the federal legislation, the repeal of ABX1 28′s nexus expanding provisions will remain in effect until January 1, 2013.
  • However, if federal law is not enacted on or before July 31, 2012,  the repeal of ABX1 28′s nexus expanding provisions will only remain in effect until September 15, 2012.
What this means is that Amazon could enjoy at least a one year reprieve from collecting California sales tax even if the company re-commissions its in-state marketing affiliates immediately. Another significant change introduced by AB 155 is that it increases the “$500,000 in California sales in the prior 12 month” threshold in ABX1 28 to $1,000.000.  That is, once the repeal of ABX1 28 is lifted, remote retailers will be presumed to have sales tax nexus by virtue of a commission based web-linking arrangement if they made total sales of $1,000,000 or more of tangible personal property to California customers within the prior twelve months and paid more than $10,000 in commissions to their California affiliates.

Sylvia’s Summation

The compromise solution isn’t a done deal yet.  The suspense continues as AB 155 is currently on Governor Brown’s desk awaiting his signature. While he’s publicly voiced his disappointment in the outcome (understandably, given California’s huge deficit and unemployment issues), the general feeling is that he’ll approve the bill by the October 7th deadline given the overwhelming support it has drawn, not just from the California legislature, but from Board of Equalization members, such as George Runner, who recently disclosed that not a single out-of-state e-tailer had registered to collect sales tax since California’s “Amazon Law” was passed, and of course from Amazon, who considers the compromise bill a “win-win” and has promised to support a federal solution. But here’s an interesting note, the pending federal solution currently in Congress is the Main Street Fairness legislation (S. 1452 and H.R. 2701) introduced by Congressional Democrats in July. Although a few Republicans, such as Senators Bob Corker (TN) and Luke Kenly (IN), have voiced their support of the Main Street Fairness legislation, no Republican has formally added their name to the roster of supporters on either bill! Another note is that the Main Street Fairness legislation, even if passed, would only grant the authority to require out-of-state retailers to charge sales tax to full-member Streamlined Sales & Use Tax Agreement (SSUTA) states. California is not currently one of the 21 SSUTA full-member states.  So at least at this time, the Main Street Fairness legislation wouldn’t apply in California.  While these latest developments may have been the season finale – one thing is for sure, this drama isn’t done yet!


The above post, "California's 'Amazon Law' Drama Continues: An Update on Recent Developments", is based on Sylvia Dion's post, "Amazon Law (& Order). The California Season Summary...", published 9/14/2011.  The content from her post has been re-produced in this post for the benefit of the "Buzz's" readers.

See the side-bar for more about Sylvia's E-Commerce/Internet Sales Tax contributions to the site.