On July 14, 2016, Congressman Jim Sensenbrenner (R-WI) introduced HR 5893, the "No Regulation Without Representation Act of 2016." If enacted, the bill would codify the Quill¹ physical presence requirement for sales and use tax collection and the reporting of any sales and use tax information, applicable to calendar quarters beginning on or after January 1, 2017.

Under the bill, persons would have a physical presence with a state only if their business activities in the state include any of the following during the calendar year:

— Owns, holds a leasehold interest, or maintains real property (e.g., retail store, warehouse, distribution center, manufacturing operation, assembly facility) in the state;
— Leases or owns tangible personal property (other than computer software) of more than de minimis value in the state;
— Has employees, agents or independent contractors in the state who solicit orders for goods and services from customers in that state, or prospective customers in that state, on behalf of the person;
— Has employees or independent contractors in the state who provide on-site design, installation or repair services on behalf of a remote seller; or
— Maintains an office in the state at which it regularly employs three or more employees for any purpose.

De minimis physical presence would include click-through agreements, presence in the state for less than 15 days during the tax year, delivery and product placement services offered by an inter- or intra- state common carrier, and internet advertising services provided by in-state residents that are not exclusively directed towards (or do not solicit exclusively) in-state customers.

Provisions of the bill also would provide federal district courts with original jurisdiction over civil actions to enforce the provisions of this bill.

Lastly, the bill defines various terms, including marketplace provider, marketplace seller, referrer, person, seller, similar tax and state.

Implications

Although the bill's chance of passage is seen as low, its introduction does create a hurdle for states seeking a judicial challenge to Quill. Specifically, the courts may view the fact that a number of competing bills and positions have been put forth as a sign that Congress is working towards crafting a comprehensive solution to the issue of nexus for transaction tax purposes. If so, the courts may see overturning Quill at this time as unnecessary and, in fact, consistent with Justice Stevens' statement in the Quill ruling that Congress is better equipped to manage the difficult issues of sales and use tax nexus. Earlier this year, Senate Majority leader Mitch McConnell (R-KY), as part of the negotiations towards passing a permanent Internet Tax Freedom Act, had promised supporters of the Marketplace Fairness Act (S 698) a stand-alone vote on that measure. To date, no such vote has occurred or been scheduled. Nevertheless, given that a significant debate continues to brew within Congress, the courts ultimately may decide to let precedent stand, in the form of Quill, until a legislative solution can be concluded.

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ENDNOTES

¹ Quill Corp. v. North Dakota, 504 U.S. 298 (1992).