Provisions in Omnibus Bill Expand MN’s Online Shopping Tax Power

Online marketplace providers will now have to collect sales taxes on behalf of their retailers.

ST. PAUL, Minn. – Language contained within the state legislature’s omnibus tax bills will create new ways for the Minnesota to collect sales tax on internet purchases.

HF 4 and SF2225 include provisions which would expand the definition of which businesses are required to collect sales tax for online purchases. Significantly, the bill would now require any online marketplace provider to collect and remit sales tax for any seller they do business with if the provider maintains a place of business in the state.

For the purposes of the bill, a marketplace provider is any person or business which facilitates a retail sale by advertising the retailer’s goods for sale, or collecting payment from the customer and transmitting it to the retailer.

The bill also expands the definition of a retailer’s presence in the state to include “the employment of a resident of this state who works from a home office in this state.”

As such, if the bill were passed, it would require companies like Ebay to collect sales taxes on transactions made on their site.

NetChoice is a trade association of eCommerce businesses and online consumers. Their stated mission is “promoting convenience, choice, and commerce on the net.” NetChoice strongly condemned these provisions of the omnibus tax bill.

“This bill is like requiring the Mall of America to be responsible and liable for the sales tax on purchases made at stores in the mall. That sounds absurd since states have always imposed sales tax on the actual seller, not on malls or marketplaces,” NetChoice Executive Director Steve DelBianco said in a press release. “Gopher State residents agree, as 4 out of 5 with an opinion on this legislation do not support it.”

Currently companies are required to collect and remit sales taxes only if they or their affiliate maintain a physical presence in the state. The affiliate definition currently only applies if companies have strong financial and ownership ties, or if the affiliate company uses its in state facilities to advertise retailers’ products, or provides customer relations services for the retailer.

The bill would result in a much broader definition of affiliates. Under the bill’s language, an affiliate will now also include any company that maintains a presence in Minnesota to facilitate delivery of goods or services to in-state customers; delivers goods and services in-state; or shares managment, business practices, or employees with the retailer; or engages in intercompany transactions with the retailer.

NetChoice along with Americans for Tax Reform conducted a poll of Minnesotans. The results of the poll find that 62 percent of those surveyed oppose this provision in the omnibus tax bill. Furthermore, 54 percent believe that these provisions are equivalent to a tax increase.

Anders Koskinen