Remote Transactions Parity Act (RTPA) of 2015 Provides No Exceptions

The RTPA of 2015 was introduced by Rep. Chaffetz this week in an attempt to provide an alternative to the Marketplace Fairness Act (MFA). If you have read the numerous articles circling in the media, there are groups that praise the RTPA and several that throw stones.

Without taking sides on the issue, the RTPA proposes to reach the same goal of the Marketplace Fairness Act and that is, 'level the playing field' between remote/online retailers and traditional brick and mortar retailers. The RTPA plans to achieve that level playing field the same way the MFA proposed - by ignoring legal precedent against imposing sales tax collection obligations on out-of-state taxpayers who lack a physical presence in a state.

The RTPA proposes to allow each member state under the Streamlined Sales and Use Tax Agreement to require remote sellers not qualifying for the small remote seller exception to collect and remit sales and use taxes on remote sales. States that are not members of the Streamlined Sales and Use Tax Agreement may require remote sellers to collect and remit sales and use taxes on remote sales as long as the state adopts and implements minimum simplification requirements. The act provides a listing of the 'simplification requirements.'

Perhaps the most significant concern with the RTPA (aside from the obvious) is the definition of 'small remote seller." Small remote sellers would be excluded from the collection requirements. The small remote seller exclusion is a phased-in approach and the definition doesn't include remote sellers that use an 'electronic marketplace' (like Etsy). Consequently, any small remote seller using Etsy would be subject to the collection requirements. That is crazy my friends. Most, if not all, remote sellers using Etsy are 'small remote sellers,' otherwise they wouldn't be using Etsy.

The RTPA defines an 'electronic marketplace' as a digital marketing platform where products or services are offered for sale by more than one remote seller, and buyers may purchase such products or services through a common system.

For the first year after enactment, small remote sellers are defined as having gross receipts less than $10 million. For the second year, small remote sellers are defined as having less than $5 million. For the third year, small remote sellers are defined as having less than $1 million in gross receipts.

Despite what side of the issue you are on, you have to ask the following questions: Why does the 'small remote sellers' exception phase-out? Why tax remote sellers using an electronic marketplace regardless of the amount of sales? 

The RTPA asserts that the Act does not create any nexus between a person and a state. This is a strange statement since the effect of the RTPA is creating a nexus relationship between the remote seller and customer causing the remote seller to collect and remit sales taxes. That's like the common analogy of 'putting lipstick on a pig.' Regardless of what you do or call it, it is still a pig.

The RTPA defines a 'remote sale' as a sale that originates in one State and is sourced to another State which the seller would not legally be required to pay, collect or remit state or local sales and use taxes without the authority provided by the RTPA. Consequently, the RTPA is giving states the right to do something that (without the RTPA) would be illegal.

Regardless of what you think about the RTPA, Congress is definitely looking for solutions to resolve this perceived loophole or problem of collecting sales tax on remote sales. My intuition tells me that a solution will be enacted; however, I'm not convinced that solution should be the RTPA.