The Senate passed The Marketplace Fairness Act (the “Act”) and sent the bill for consideration to the House.
The Senate passed The Marketplace Fairness Act (the “Act”) and sent the bill for consideration to the House. The Act provides that internet retailers must collect sales tax on out-of-state transactions reversing the holdings of cases and interpretations of statutes that protected out-of-state sellers for decades.
There is a long history of case law that prevented out-of-state businesses from being subject to taxation or collecting taxes unless the business had “sufficient contacts” with the state to justify this jurisdiction. Prior to the internet, jurisdictional issues arose out of travelling salesmen, title passage rules and drop shipments. More sophisticated questions arose out of intercompany fees for licensing intangibles, leased employees and order fulfillment centers. States, however, could not exert jurisdiction over a non-resident seller who took orders over the internet. Instead, states relied on their citizens to pay use tax on out-of-state purchases.
In order for a state to obtain the privileges of the Act, the state must either adopt the Streamlined Sales and Use Tax Agreement or adhere to a more simplified sales tax measure. The key measure in either case is that the location of the buyer determines the sales tax rate and state to which it is paid. This will create a more level playing field between brick and mortar retailers and internet retailers. It will certainly help states to collect revenue.
If this precedent is overcome, it will not be long before a VAT could be imposed. European countries impose a VAT on sales of goods and services. The proponents of a VAT cite the sophistication of software to do the reporting and tax calculation. I predict that we will do the same to capture more transactions in the tax net.
Supreme Court and Title VII: Implications for Reverse Discrimination
Earlier this month, the U.S. Supreme Court issued a decision in Ames v. Ohio Department of Youth Services vitiating the so-called “background circumstances” test required by half of federal circuit courts.1 The background circumstances test required majority group plaintiffs pleading discrimination under Title VII of the Civil Rights Act to meet a heightened pleading standard […]
Special purpose acquisition companies (better known as SPACs) appear to be making a comeback. SPAC offerings for 2025 have already nearly surpassed last year’s totals, with additional transactions in the pipeline. SPACs last experienced a boom between 2020–2021, with approximately 600 U.S. companies raising a record $163 billion in 2021. Notable companies that went public […]
Short Form Merger: Streamlining the Process for Businesses
Merging two companies is a complex legal and business transaction. A short form merger, in which an acquiring company merges with a subsidiary corporation, offers a more streamlined process that involves important corporate governance considerations. A short form merger, in which an acquiring company merges with a subsidiary corporation, offers a more streamlined process. However, […]
Tariff Response Options for Small Businesses Facing Financial Distress
The Trump Administration’s new tariffs are having an oversized impact on small businesses, which already tend to operate on razor thin margins. Many businesses have been forced to raise prices, find new suppliers, lay off staff, and delay growth plans. For businesses facing even more dire financial circumstances, there are additional tariff response options, including […]
Common Causes of Partnership Disputes and How to Resolve Them
Business partnerships, much like marriages, function exceptionally well when partners are aligned but can become challenging when disagreements arise. Partnership disputes often stem from conflicts over business strategy, financial management, and unclear role definitions among partners. Understanding Business Partnership Conflicts Partnership conflicts place significant stress on businesses, making proactive measures essential. Partnerships should establish detailed […]
Businesses Are Facing Financial Headwinds—A Practical Guide
*** The original article was featured on Bloomberg Tax, April 28, 2025 — As a tax attorney who spends much of my time helping people and companies who have large, unresolved issues with the IRS or one or more state tax departments, it often occurs to me that the best service that I can provide […]
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