II

104TH CONGRESS

1ST SESSION S. 545

To authorize collection of certain State and local taxes with respect to the

sale, delivery, and use of tangible personal property.

IN THE SENATE OF THE UNITED STATES

MARCH 13 (legislative day, MARCH 6), 1995

Mr. BUMPERS (for himself and Mr. GRAHAM) introduced the following bill;

which was read twice and referred to the Committee on Finance

A BILL

To authorize collection of certain State and local taxes with

respect to the sale, delivery, and use of tangible personal

property.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Consumer and Main

5 Street Protection Act of 1995’’.

6 SEC. 2. FINDINGS.

7 The Congress finds that—

8 (1) merchandise purchased from out-of-State

9 firms is subject to State and local sales taxes in the
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1 same manner as merchandise purchased from in2 State firms,

3 (2) State and local governments generally are

4 unable to compel out-of-State firms to collect and

5 remit such taxes, and consequently, many out-of6 State firms choose not to collect State and local

7 taxes on merchandise delivered across State lines,

8 (3) moreover, many out-of-State firms fail to

9 inform their customers that such taxes exist, with

10 some firms even falsely claim that merchandise pur11 chased out-of-State is tax-free, and consequently,

12 many consumers unknowingly incur tax liabilities,

13 including interest and penalty charges,

14 (4) Congress has a duty to protect consumers

15 from explicit or implicit misrepresentations of State

16 and local sales tax obligations,

17 (5) small businesses, which are compelled to

18 collect State and local sales taxes, are subject to un19 fair competition when out-of-State firms cannot be

20 compelled to collect and remit such taxes on their

21 sales to residents of the State,

22 (6) State and local governments provide a num23 ber of resources to out-of-State firms including gov24 ernment services relating to disposal of tons of cata-
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1 logs, mail delivery, communications, and bank and

2 court systems,

3 (7) the inability of State and local governments

4 to require out-of-State firms to collect and remit

5 sales taxes deprives State and local governments of

6 needed revenue and forces such State and local gov7 ernments to raise taxes on taxpayers, including con8 sumers and small businesses, in such State,

9 (8) the Supreme Court ruled in Quill Corpora10 tion v. North Dakota, 112 S. Ct. 1904 (1992) that

11 the due process clause of the Constitution does not

12 prohibit a State government from imposing personal

13 jurisdiction and tax obligations on out-of-State firms

14 that purposefully solicit sales from residents therein,

15 and that the Congress has the power to authorize

16 State governments to require out-of-State firms to

17 collect State and local sales taxes, and

18 (9) as a matter of federalism, the Federal Gov19 ernment has a duty to assist State and local govern20 ments in collecting sales taxes on sales from out-of21 State firms.

22 SEC. 3. AUTHORITY FOR COLLECTION OF SALES TAX.

23 (a) IN GENERAL.—A State is authorized to require

24 a person who is subject to the personal jurisdiction of the

25 State to collect and remit a State sales tax, a local sales
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1 tax, or both, with respect to tangible personal property

2 if—

3 (1) the destination of the tangible personal

4 property is in the State,

5 (2) during the 1-year period ending on Septem6 ber 30 of the calendar year preceding the calendar

7 year in which the taxable event occurs, the person

8 has gross receipts from sales of such tangible per9 sonal property—

10 (A) in the United States exceeding

11 $3,000,000, or

12 (B) in the State exceeding $100,000, and

13 (3) the State, on behalf of its local jurisdictions,

14 collects and administers all local sales taxes imposed

15 pursuant to this Act.

16 (b) STATES MUST COLLECT LOCAL SALES TAXES.—

17 Except as provided in section 4(d), a State in which both

18 State and local sales taxes are imposed may not require

19 State sales taxes to be collected and remitted under sub20 section (a) unless the State also requires the local sales

21 taxes to be collected and remitted under subsection (a).

22 (c) AGGREGATION RULES.—All persons that would

23 be treated as a single employer under section 52 (a) or

24 (b) of the Internal Revenue Code of 1986 shall be treated

25 as one person for purposes of subsection (a).
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1 (d) DESTINATION.—For purposes of subsection (a),

2 the destination of tangible personal property is the State

3 or local jurisdiction which is the final location to which

4 the seller ships or delivers the property, or to which the

5 seller causes the property to be shipped or delivered, re6 gardless of the means of shipment or delivery or the loca7 tion of the buyer.

8 SEC. 4. TREATMENT OF LOCAL SALES TAXES.

9 (a) UNIFORM LOCAL SALES TAXES.—

10 (1) IN GENERAL.—Sales taxes imposed by local

11 jurisdictions of a State shall be deemed to be uni12 form for purposes of this Act and shall be collected

13 under this Act in the same manner as State sales

14 taxes if—

15 (A) such local sales taxes are imposed at

16 the same rate and on identical transactions in

17 all geographic areas in the State, and

18 (B) such local sales taxes imposed on sales

19 by out-of-State persons are collected and ad20 ministered by the State.

21 (2) APPLICATION TO BORDER JURISDICTION

22 TAX RATES.—A State shall not be treated as failing

23 to meet the requirements of paragraph (1)(A) if,

24 with respect to a local jurisdiction which borders on

25 another State, such State or local jurisdiction—
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1 (A) either reduces or increases the local

2 sales tax in order to achieve a rate of tax equal

3 to that imposed by the bordering State on iden4 tical transactions, or

5 (B) exempts from the tax transactions

6 which are exempt from tax in the bordering

7 State.

8 (b) NONUNIFORM LOCAL SALES TAXES.—

9 (1) IN GENERAL.—Except as provided in sub10 section (d), nonuniform local sales taxes required to

11 be collected pursuant to this Act shall be collected

12 under one of the options provided under paragraph

13 (2).

14 (2) ELECTION.—For purposes of paragraph

15 (1), any person required under authority of this Act

16 to collect nonuniform local sales taxes shall elect to

17 collect either—

18 (A) all nonuniform local sales taxes appli19 cable to transactions in the State, or

20 (B) a fee (at the rate determined under

21 paragraph (3)) which shall be in lieu of the

22 nonuniform local sales taxes described in sub23 paragraph (A).
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1 Such election shall require the person to use the

2 method elected for all transactions in the State while

3 the election is in effect.

4 (3) RATE OF IN-LIEU FEE.—For purposes of

5 paragraph (2)(B), the rate of the in-lieu fee for any

6 calendar year shall be an amount equal to the prod7 uct of—

8 (A) the amount determined by dividing

9 total nonuniform local sales tax revenues col10 lected in the State for the most recently com11 pleted State fiscal year for which data is avail12 able by total State sales tax revenues for the

13 same year, and

14 (B) the State sales tax rate.

15 Such amount shall be rounded to the nearest 0.25

16 percent.

17 (4) NONUNIFORM LOCAL SALES TAXES.—For

18 purposes of this Act, nonuniform local sales taxes

19 are local sales taxes which do not meet the require20 ments of subsection (a).

21 (c) DISTRIBUTION OF LOCAL SALES TAXES.—

22 (1) IN GENERAL.—Except as provided in sub23 section (d), a State shall distribute to local jurisdic24 tions a portion of the amounts collected pursuant to

25 this Act determined on the basis of—
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1 (A) in the case of uniform local sales taxes,

2 the proportion which each local jurisdiction re3 ceives of uniform local sales taxes not collected

4 pursuant to this Act,

5 (B) in the case of in-lieu fees described in

6 subsection (b)(2)(B), the proportion which each

7 local jurisdiction’s nonuniform local sales tax

8 receipts bears to the total nonuniform local

9 sales tax receipts in the State, and

10 (C) in the case of any nonuniform local

11 sales tax collected pursuant to this Act, the geo12 graphical location of the transaction on which

13 the tax was imposed.

14 The amounts determined under subparagraphs (A)

15 and (B) shall be calculated on the basis of data for

16 the most recently completed State fiscal year for

17 which the data is available.

18 (2) TIMING.—Amounts described in paragraph

19 (1) (B) or (C) shall be distributed by a State to its

20 local jurisdictions in accordance with State time21 tables for distributing local sales taxes, but not less

22 frequently than every calendar quarter. Amounts de23 scribed in paragraph (1)(A) shall be distributed by

24 a State as provided under State law.
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1 (3) TRANSITION RULE.—If, upon the effective

2 date of this Act, a State has a State law in effect

3 providing a method for distributing local sales taxes

4 other than the method under this subsection, then

5 this subsection shall not apply to that State until the

6 91st day following the adjournment sine die of that

7 State’s next regular legislative session which con8 venes after the effective date of this Act (or such

9 earlier date as State law may provide). Local sales

10 taxes collected pursuant to this Act prior to the ap11 plication of this subsection shall be distributed as

12 provided by State law.

13 (d) EXCEPTION WHERE STATE BOARD COLLECTS

14 TAXES.—Notwithstanding section 3(b) and subsections

15 (b) and (c) of this section, if a State had in effect on Janu16 ary 1, 1995, a State law which provides that local sales

17 taxes are collected and remitted by a board of elected

18 States officers, then for any period during which such law

19 continues in effect—

20 (1) the State may require the collection and re21 mittance under this Act of only the State sales taxes

22 and the uniform portion of local sales taxes, and

23 (2) the State may distribute any local sales

24 taxes collected pursuant to this Act in accordance

25 with State law.
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1 SEC. 5. RETURN AND REMITTANCE REQUIREMENTS.

2 (a) IN GENERAL.—A State may not require any per3 son subject to this Act—

4 (1) to file a return reporting the amount of any

5 tax collected or required to be collected under this

6 Act, or to remit the receipts of such tax, more fre7 quently than once with respect to sales in a calendar

8 quarter, or

9 (2) to file the initial such return, or to make

10 the initial such remittance, before the 90th day after

11 the person’s first taxable transaction under this Act.

12 (b) LOCAL TAXES.—The provisions of subsection (a)

13 shall also apply to any person required by a State acting

14 under authority of this Act to collect a local sales tax or

15 in-lieu fee.

16 SEC. 6. NONDISCRIMINATION AND EXEMPTIONS.

17 Any State which exercises any authority granted

18 under this Act shall allow to all persons subject to this

19 Act all exemptions or other exceptions to State and local

20 sales taxes which are allowed to persons located within the

21 State or local jurisdiction.

22 SEC. 7. APPLICATION OF STATE LAW.

23 (a) PERSONS REQUIRED TO COLLECT STATE OR

24 LOCAL SALES TAX.—Any person required by section 3 to

25 collect a State or local sales tax shall be subject to the

26 laws of such State relating to such sales tax to the extent
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1 that such laws are consistent with the limitations con2 tained in this Act.

3 (b) LIMITATIONS.—Except as provided in subsection

4 (a), nothing in this Act shall be construed to permit a

5 State—

6 (1) to license or regulate any person,

7 (2) to require any person to qualify to transact

8 intrastate business, or

9 (3) to subject any person to State taxes not re10 lated to the sales of tangible personnel property.

11 (c) PREEMPTION.—Except as otherwise provided in

12 this Act, this Act shall not be construed to preempt or

13 limit any power exercised or to be exercised by a State

14 or local jurisdiction under the law of such State or local

15 jurisdiction or under any other Federal law.

16 SEC. 8. TOLL-FREE INFORMATION SERVICE.

17 A State shall not have power under this Act to re18 quire any person to collect a State or local sales tax on

19 any sale unless, at the time of such sale, such State has

20 a toll-free telephone service available to provide such per21 son information relating to collection of such State or local

22 sales tax. Such information shall include, at a minimum,

23 all applicable tax rates, return and remittance addresses

24 and deadlines, and penalty and interest information. As

25 part of the service, the State shall also provide all nec-
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1 essary forms and instructions at no cost to any person

2 using the service. The State shall prominently display the

3 toll-free telephone number on all correspondence with any

4 person using the service. This service may be provided

5 jointly with other States.

6 SEC. 9. DEFINITIONS.

7 For the purposes of this Act—

8 (1) the term ‘‘compensating use tax’’ means a

9 tax imposed on or incident to the use, storage, con10 sumption, distribution, or other use within a State

11 or local jurisdiction or other area of a State, of tan12 gible personal property;

13 (2) the term ‘‘local sales tax’’ means a sales tax

14 imposed in a local jurisdiction or area of a State and

15 includes, but is not limited to—

16 (A) a sales tax or in-lieu fee imposed in a

17 local jurisdiction or area of a State by the State

18 on behalf of such jurisdiction or area, and

19 (B) a sales tax imposed by a local jurisdic20 tion or other State-authorized entity pursuant

21 to the authority of State law, local law, or both;

22 (3) the term ‘‘person’’ means an individual, a

23 trust, estate, partnership, society, association, com24 pany (including a limited liability company) or cor25 poration, whether or not acting in a fiduciary or rep-
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1 resentative capacity, and any combination of the

2 foregoing;

3 (4) the term ‘‘sales tax’’ means a tax, including

4 a compensating use tax, that is—

5 (A) imposed on or incident to the sale,

6 purchase, storage, consumption, distribution, or

7 other use of tangible personal property as may

8 be defined or specified under the laws imposing

9 such tax, and

10 (B) measured by the amount of the sales

11 price, cost, charge or other value of or for such

12 property; and

13 (5) the term ‘‘State’’ means any of the several

14 States of the United States, the District of Colum15 bia, the Commonwealth of Puerto Rico, and any ter16 ritory or possession of the United States.

17 SEC. 10. EFFECTIVE DATE.

18 This Act shall take effect 180 days after the date of

19 the enactment of this Act. In no event shall this Act apply

20 to any sale occurring before such effective date.

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