Tax Fairness for Main Street Business Act of 1994

Summary: Tax Fairness for Main Street Business Act of 1994 - Authorizes a State or local jurisdiction to require certain out-of-State businesses to collect sales taxes on tangible personal property sold to residents of the State or local jurisdiction. 
Provides an in-lieu fee rate where local taxes are not uniform. 
Requires a State to distribute taxes collected under this Act proportionately to taxes collected separate from this Act. 
Prohibits a State from requiring out-of-State businesses to file reporting returns more than once every calendar quarter. 
Requires a State to establish toll-free information services to provide such businesses with necessary forms and instructions.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Tax Fairness for Main Street 
Business Act of 1994''.

SEC. 2. FINDINGS.

    The Congress finds that--
            (1) sales by out-of-State firms already are subject to 
        State and local sales taxes, but State and local governments 
        are unable to compel out-of-State firms to collect and remit 
        such taxes,
            (2) small businesses, which are compelled to collect State 
        and local sales taxes, are subject to unfair competition when 
        out-of-State firms cannot be compelled to collect and remit 
        such taxes on their sales to residents of the State,
            (3) State and local governments provide a number of 
        resources to out-of-State firms including government services 
        relating to mail delivery, communications, bank and court 
        systems, and disposal of tons of catalogs,
            (4) the inability of State and local governments to require 
        out-of-State firms to collect and remit sales taxes deprives 
        State and local governments of needed revenue and forces such 
        State and local governments to raise taxes on taxpayers, 
        including small businesses, in such State,
            (5) the Supreme Court ruled in Quill v. North Dakota, 112 
        U.S. 1904 (1992) that the due process clause of the 
        Constitution does not prohibit a State government from imposing 
        personal jurisdiction and tax obligations on out-of-State firms 
        that purposefully solicit sales from residents therein, and 
        that the Congress has the power to authorize State governments 
        to require out-of-State firms to collect State and local sales 
        taxes, and
            (6) as a matter of federalism, the Federal Government has a 
        duty to assist State and local governments in collecting sales 
        taxes on sales from out-of-State firms.

SEC. 3. AUTHORITY FOR COLLECTION OF SALES TAX.

    (a) In General.--A State is authorized to require a person who is 
subject to the personal jurisdiction of the State to collect and remit 
a State sales tax, a local sales tax, or both, with respect to tangible 
personal property if--
            (1) the destination of the tangible personal property is in 
        the State,
            (2) during the 1-year period ending on September 30 of the 
        calendar year preceding the calendar year in which the taxable 
        event occurs, the person has gross receipts from sales of such 
        tangible personal property--
                    (A) in the United States exceeding $3,000,000, or
                    (B) in the State exceeding $100,000, and
            (3) the State, on behalf of its local jurisdictions, 
        collects and administers all local sales taxes imposed pursuant 
        to this Act.
    (b) States Must Collect Local Sales Taxes.--A State in which both 
State and local sales taxes are imposed may not require State sales 
taxes to be collected and remitted under subsection (a) unless the 
State also requires the local sales taxes to be collected and remitted 
under subsection (a).
    (c) Aggregation Rules.--All persons that would be treated as a 
single employer under section 52 (a) or (b) of the Internal Revenue 
Code of 1986 shall be treated as one person for purposes of subsection 
(a).
    (d) Destination.--For purposes of subsection (a), the destination 
of tangible personal property is the State or local jurisdiction which 
is the final location to which the seller ships or delivers the 
property, or to which the seller causes the property to be shipped or 
delivered, regardless of the means of shipment or delivery or the 
location of the buyer.

SEC. 4. TREATMENT OF LOCAL SALES TAXES.

    (a) Uniform Local Sales Taxes.--
            (1) In general.--Sales taxes imposed by local jurisdictions 
        of a State shall be deemed to be uniform for purposes of this 
        Act and shall be collected under this Act in the same manner as 
        State sales taxes if--
                    (A) such local sales taxes are imposed at the same 
                rate and on identical transactions in all geographic 
                areas in the State, and
                    (B) such local sales taxes imposed on sales by out-
                of-State persons are collected and administered by the 
                State.
            (2) Application to border jurisdiction tax rates.--A State 
        shall not be treated as failing to meet the requirements of 
        paragraph (1)(A) if, with respect to a local jurisdiction which 
        borders on another State, such State or local jurisdiction--
                    (A) either reduces or increases the local sales tax 
                in order to achieve a rate of tax equal to that imposed 
                by the bordering State on identical transactions, or
                    (B) exempts from the tax transactions which are 
                exempt from tax in the bordering State.
    (b) Nonuniform Local Sales Taxes.--
            (1) In general.--Nonuniform local sales taxes required to 
        be collected pursuant to this Act shall be collected under one 
        of the options provided under paragraph (2).
            (2) Election.--For purposes of paragraph (1), any person 
        required under authority of this Act to collect nonuniform 
        local sales taxes shall elect to collect either--
                    (A) all nonuniform local sales taxes applicable to 
                transactions in the State, or
                    (B) a fee (at the rate determined under paragraph 
                (3)) which shall be in lieu of the nonuniform local 
                sales taxes described in subparagraph (A).
        Such election shall require the person to use the method 
        elected for all transactions in the State while the election is 
        in effect.
            (3) Rate of in-lieu fee.--For purposes of paragraph (2)(B), 
        the rate of the in-lieu fee for any calendar year shall be an 
        amount equal to the product of--
                    (A) the amount determined by dividing total 
                nonuniform local sales tax revenues collected in the 
                State for the most recently completed State fiscal year 
                for which data is available by total State sales tax 
                revenues for the same year, and
                    (B) the State sales tax rate.
        Such amount shall be rounded to the nearest 0.25 percent.
            (4) Nonuniform local sales taxes.--For purposes of this 
        Act, nonuniform local sales taxes are local sales taxes which 
        do not meet the requirements of subsection (a).
    (c) Distribution of Local Sales Taxes.--
            (1) In general.--A State shall distribute to local 
        jurisdictions a portion of the amounts collected pursuant to 
        this Act determined on the basis of--
                    (A) in the case of uniform local sales taxes, the 
                proportion which each local jurisdiction receives of 
                uniform local sales taxes not collected pursuant to 
                this Act,
                    (B) in the case of in-lieu fees, as described in 
                subsection (b)(2)(B), the proportion which each local 
                jurisdiction's nonuniform local sales tax receipts 
                bears to the total nonuniform local sales tax receipts 
                in the State, and
                    (C) in the case of any nonuniform local sales tax 
                collected pursuant to this Act, the geographical 
                location of the transaction on which the tax was 
                imposed.
        The amounts determined under subparagraphs (A) and (B) shall be 
        calculated on the basis of data for the most recently completed 
        State fiscal year for which the data is available.
            (2) Timing.--Amounts described in paragraph (1) (B) or (C) 
        shall be distributed by a State to its local jurisdictions in 
        accordance with State timetables for distributing local sales 
        taxes, but not less frequently than every calendar quarter. 
        Amounts described in paragraph (1)(A) shall be distributed by a 
        State as provided under State law.
            (3) Transition rule.--If, upon the effective date of this 
        Act, a State has a State law in effect providing a method for 
        distributing local sales taxes other than the method under this 
        subsection, then this subsection shall not apply to that State 
        until the 91st day following the adjournment sine die of that 
        State's next regular legislative session which convenes after 
        the effective date of this Act (or such earlier date as State 
        law may provide). Local sales taxes collected pursuant to this 
        Act prior to the application of this subsection shall be 
        distributed as provided by State law.

SEC. 5. RETURN AND REMITTANCE REQUIREMENTS.

    (a) In General.--A State may not require any person subject to this 
Act--
            (1) to file a return reporting the amount of any tax 
        collected or required to be collected under this Act, or to 
        remit the receipts of such tax, more frequently than once with 
        respect to sales in a calendar quarter, or
            (2) to file the initial such return, or to make the initial 
        such remittance, before the 90th day after the person's first 
        taxable transaction under this Act.
    (b) Local Taxes.--The provisions of subsection (a) shall also apply 
to any person required by a State acting under authority of this Act to 
collect a local sales tax or in-lieu fee.

SEC. 6. NONDISCRIMINATION AND EXEMPTIONS.

    A State shall not have power under this Act to require any person 
not located in the State or local jurisdiction to collect and remit a 
State or local sales tax if a person located in the State or local 
jurisdiction would have been exempt from or otherwise not subject to 
such State or local sales tax under similar circumstances.

SEC. 7. APPLICATION OF STATE LAW.

    (a) Persons Required To Collect State or Local Sales Tax.--Any 
person required by section 3 to collect a State or local sales tax 
shall be subject to the laws of such State relating to such sales tax 
to the extent that such laws are consistent with the limitations 
contained in this Act.
    (b) Limitations.--Except as provided in subsection (a), nothing in 
this Act shall be construed to permit a State--
            (1) to license or regulate any person,
            (2) to require any person to qualify to transact intrastate 
        business, or
            (3) to subject any person to State taxes not related to the 
        sales of tangible personnel property.
    (c) Preemption.--Except as otherwise provided in this Act, this Act 
shall not be construed to preempt or limit any power exercised or to be 
exercised by a State or local jurisdiction under the law of such State 
or local jurisdiction or under any other Federal law.

SEC. 8. TOLL-FREE INFORMATION SERVICE.

    A State shall not have power under this Act to require any person 
to collect a State or local sales tax on any sale unless, at the time 
of such sale, such State has a toll-free telephone service available to 
provide such person information relating to collection of such State or 
local sales tax. Such information shall include, at a minimum, all 
applicable tax rates, return and remittance addresses and deadlines, 
and penalty and interest information. As part of the service, the State 
shall also provide all necessary forms and instructions at no cost to 
any person using the service. The State shall prominently display the 
toll-free telephone number on all correspondence with any person using 
the service. This service may be provided jointly with other States.

SEC. 9. DEFINITIONS.

    For the purposes of this Act--
            (1) the term ``compensating use tax'' means a tax imposed 
        on or incident to the use, storage, consumption, distribution, 
        or other use within a State or local jurisdiction or other area 
        of a State, of tangible personal property;
            (2) the term ``local sales tax'' means a sales tax imposed 
        in a local jurisdiction or area of a State and includes, but is 
        not limited to--
                    (A) a sales tax or in-lieu fee imposed in a local 
                jurisdiction or area of a State by the State on behalf 
                of such jurisdiction or area, and
                    (B) a sales tax imposed by a local jurisdiction or 
                other State-authorized entity pursuant to the authority 
                of State law, local law, or both;
            (3) the term ``person'' means an individual, a trust, 
        estate, partnership, society, association, company or 
        corporation, including a limited liability company, whether or 
        not acting in a fiduciary or representative capacity, and any 
        combination of the foregoing;
            (4) the term ``sales tax'' means a tax, including a 
        compensating use tax, that is--
                    (A) imposed on or incident to the sale, purchase, 
                storage, consumption, distribution, or other use of 
                tangible personal property as may be defined or 
                specified under the laws imposing such tax, and
                    (B) measured by the amount of the sales price, 
                cost, charge or other value of or for such property; 
                and
            (5) the term ``State'' means any of the several States of 
        the United States, the District of Columbia, the Commonwealth 
        of Puerto Rico, and any territory or possession of the United 
        States.

SEC. 10. EFFECTIVE DATE.

    This Act shall take effect 180 days after the date of the enactment 
of this Act. In no event shall this Act apply to any sale occurring 
before such effective date.