State efforts to undermine or challenge the Quill Corp. v. North Dakota, 504 U.S. 298 (1992) physical presence standard escalated this summer with the enactment of two sales and use tax laws targeting marketplace operators. Minnesota House File 1 (“H.F. 1”) and Washington House Bill 2163 (“H.B. 2163”), signed into law on May 30, 2017 and July 7, 2017, respectively, impose sales and use tax obligations on certain marketplaces that facilitate the sales of out-of-state third party retailers. Minnesota and Washington are the first two states to enact such laws, and similar legislation is currently pending in the Pennsylvania General Assembly.
On June 12, 2017, Congressman Jim Sensenbrenner (R-WI) reintroduced into Congress H.R. 2887, also known as the “No Regulation Without Representation Act of 2017” (the “Legislation”), which codifies the physical presence nexus requirement established by the U.S. Supreme Court in Quill v. North Dakota, 504 U.S. 298 (1992) (“Quill”). The Legislation is interesting for several reasons: (1) it proposes to employ a result that is the exact opposite of the recent trend to overturn Quill; (2) it defines “tax” broadly to include net income and business activity taxes; and (3) it expands the law to require a physical presence for states to regulate a person’s activity in interstate commerce outside of the tax context.
The dispute in California over taxpayers’ ability to elect to use the evenly weighted, three-factor (i.e., property factor, payroll factor, and sales factor) business income apportionment formula provided by the Multistate Tax Compact (the “Compact”) has come to an end. On October 11, 2016, the US Supreme Court denied the taxpayers’ petition for certiorari in The Gillette Company, et al. v. California Franchise Tax Board, et al., No. 15-1442 — one of the most highly publicized MTC apportionment election cases.
The U.S. House of Representatives passed H.R. 2315, the Mobile Workforce State Income Tax Simplification Act of 2015 (“Mobile Workforce Act” or “Act”), on September 21, 2016. The Senate received the House-approved bill on September 22, 2016, and its ultimate fate remains unclear.