Iowa Senate subcommittee moves huge expansion of sales tax nexus

March 28th, 2012 by Joe Kristan

Amazon LogoThe state legislature is looking to pass a huge expansion of Iowa’s ability to collect sales tax from out-of-state businesses.  The bill is in the guise of “protecting Main Street” from the predations of Amazon, and the Iowans who buy from them, by closing the “Amazon loophole.”   There’s a lot more, though, if you look at the fine print.  From the text of  SF 2309:

(1)  A retailer shall be presumed to be maintaining a place of business in this state, as defined in paragraph “a”, if any person that has substantial nexus in this state, other than a person acting in its capacity as a common carrier, does any of the following:

   (a)  Sells a similar line of products as the retailer and does so under the same or similar business name

   (b)  Maintains an office, distribution facility, warehouse, storage place, or similar place of business in this state to facilitate the delivery of property or services sold by the retailer to the retailer’s customers.

   (c)  Uses trademarks, service marks, or trade names in this state that are the same or substantially similar to those used by the retailer.

   (d)  Delivers, installs, assembles, or performs maintenance services for the retailer’s customers.

   (e)  Facilitates the retailer’s delivery of property to customers in this state by allowing the retailer’s customers to take delivery of property sold by the retailer at an office, distribution facility, warehouse, storage place, or similar place of business maintained by the person in this state.

   (f)  Conducts any other activities in this state that are significantly associated with the retailer’s ability to establish and maintain a market in this state for the retailer’s sales.

In other words, it wouldn’t just get companies that sell in Iowa through Amazon.  It would require anybody whose business has somebody who distributes their stuff in Iowa  to collect sales tax on items shipped directly to customers in Iowa, even by another subsidiary in a controlled group.  This would be a brazen violoation of the Supreme Court’s Quill ruling, which requires physical presence to impose a sales tax.  The KFC case, which expanded Iowa income tax nexis to taxpayers with only “intangibles” in Iowa,  was (lamely)  justified by saying Quill only covered sales taxes; they don’t even have that fig leaf here.  We’ll see if the whole legislature is in for another trip to the Supreme Court.  Ultimately only Congres is in a position to bring some order to interstate Internet sales tax rules.


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