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SALT TALK: Remote Sellers - Cry Uncle, Not Wolf?

Wayne Berkowitz CPA, J.D., LL.M. 07.24.2017 | SALT TALK

Some of my readers may have thought that I was crying wolf as far back as February 29, 2016 and again on May 8, 2017 as well as October 24, 2016.  As it turns out, I wasn’t and now just might be the time we have to face the music.  You see dear readers, as of July 1, Colorado is now enforcing the infamous “tattle-tale” rule enacted almost seven years ago.

I’m not sure if Colorado was Connecticut’s inspiration, but rumor has it that Connecticut has been recently sending demand letters to remote sellers (sellers with no place of business or other connection with the State, other than its customers) requesting that the remote seller either register for and collect and remit Connecticut sales tax or provide to the Department of Revenue Services (“DRS”) a list of Connecticut customer names, addresses, items purchased, quantities sold and amounts paid.  Apparently DRS wasn’t crying wolf as a press release was issued back in March indicating this was in the works.

As many of my readers know, a sales tax collection obligation has historically required some type of physical presence in the jurisdiction before the collection obligation could be imposed.  As ecommerce has evolved and as the Constitution has eroded (somewhat in my humble opinion) states have been hoping to make up for revenue lost to their citizens’ noncompliance with the use tax by shifting the burden to remote sellers.  As if the tax-related due process and commerce clause issues weren’t enough, the “tattle-tale” rules raise even more daunting issues.  By providing customer data to the states, remote sellers are put in the awkward position of violating their customers’ privacy as well as possibly surrendering valuable business data and trade secrets.

 To “cry uncle” is generally defined as an act of submission or a cry for mercy.  Whether a remote seller should submit to the latest arm twisting is not an easy question to answer.  In all likelihood most, if not all of these state schemes will be challenged but results are certain to be all over the place and much time will pass during the process.  I am, once again, begging the federal government for mercy by stepping in and resolving this problem once and for all.

If you have questions about the magnitude and impact of the “tattle tale” rule, I can be reached at WBerkowitz@BerdonLLP.com or contact your Berdon advisor.

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

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