What Does The Marketplace Fairness Act Mean For Connecticut?

On May 6th, the U.S. Senate voted 69 to 27 to pass legislation to improve state and local sales tax collection on remote sellers (i.e., retailers with no physical presence in a state), including internet retailers.  The bill, entitled the Marketplace Fairness Act of 2013 (S. 743), allows states to require remote sellers with more than $1 million in annual remote sales in the U.S. to collect sales and use taxes if they (1) adopt the Streamlined Sales and Use Tax Agreement  (SSUTA) or (2) take certain steps to simplify their sales tax base and structure. 

Connecticut is currently an “advisor member” of SSUTA, meaning that it does not comply with the agreement but is a non-voting member of its governing board.  Thus, Connecticut would need to follow the process the bill outlines for non-member states in order to tax remote sellers under the bill. 

This means that Connecticut could start requiring remote sellers to collect and remit sales taxes on the first day of the calendar quarter that begins at least six months after the bill’s passage.  But first, Connecticut would need to (1) enact legislation to exercise this taxing authority and (2) implement a number of simplification requirements.  These requirements include:

1. identifying a single (a) state-level agency to administer all sales and use tax laws and (b) audit and return for remote sellers within the state,
2. providing a uniform sales and use tax base within the state,
3. enacting specified sourcing rules for calculating taxes,
4. providing software and services to remote sellers to facilitate collection, and
5. giving remote sellers and software providers 90 days’ notice of any tax rate changes.

Connecticut already complies with some of these minimum simplification requirements, since it has a state-level agency that administers its sales and use tax laws (the Department of Revenue Services) and a uniform tax base across the state.  But, if the bill moves forward in the House, we can expect to hear more about how the state will implement the rest of its provisions.