Vermont considers additional notification requirements for noncollecting vendors

The Vermont Legislature is considering a bill that would impose notification requirements on noncollecting out-of-state vendors that are in addition to requirements that were enacted last year (and are not yet in effect).

Already enacted: noncollecting vendors to notify customers

Last year, Vermont enacted a use tax notification requirement that requires noncollecting vendors making sales into Vermont to “notify Vermont purchasers that sales or use tax is due on nonexempt purchases made from the noncollecting vendor and that the State of Vermont requires the purchaser to pay the tax due on his or her tax return.” Failure to comply with this requirement could lead to fines of $5.00 “for each such failure,” unless reasonable cause can be shown.

Noncollecting vendors are also required to provide all Vermont purchasers who made at least $500.00 of purchases from them during the previous calendar year with a notice detailing “the total amount paid by the purchaser for Vermont purchases made from the noncollecting vendor in the previous calendar year.” This notice must be sent to consumers on or before January 31 of each year. Vendors who fail to comply with this requirement are to be fined $10.00 “for each such failure,” unless reasonable cause for it can be shown.

Although the bill was adopted, the effective date of this use tax notification policy (see Act 134) is tied to the implementation of a similar policy in Colorado that was challenged by the Direct Marketing Association (now the Data & Marketing Association). The Vermont policy is set to take effect “on the earlier of July 1, 2017, or beginning on the first day of the first quarter after the sales and use tax reporting requirements challenged in Direct Marketing Assoc. v. Brohl … are implemented by the State of Colorado.”

Last December, the Supreme Court of the United States allowed Colorado’s policy to stand. However, the state hasn’t yet begun enforcing it and has given no indication as to if or when it will.

Under consideration: noncollecting vendors to notify the state

Now Vermont legislators are considering legislation that would impose another requirement on certain noncollecting remote vendors. Senate Bill 62 would require noncollecting vendors who make $100,000 or more of sales into Vermont in the previous calendar year to “file an annual statement for each purchaser with the Department of Taxes … showing the total amount paid for Vermont purchases by that purchaser during the preceding calendar year or any portion thereof … on or before March 1 of each year.” Failure to do so could trigger a penalty of $10.00 “for each purchaser that should have been included in the annual statement,” unless reasonable cause for failure to do so can be shown.

Under consideration: consumers to report use tax on income tax returns

All states with a sales tax have a corresponding use tax, and consumers are supposed to voluntarily remit that use tax to the state if sales tax wasn’t collected at the point of sale. However, individual use tax compliance is extremely low in all states, and it is difficult for states to enforce.

Therefore, SB 62 also seeks to increase individual use tax compliance. It authorizes the Vermont Commissioner of Taxes to “provide that individuals report use tax on their State individual income tax returns.” The department is tasked with issuing rules and forms “designed to highlight the use tax liability for taxpayers on their income tax returns, and to increase compliance” on or before September 1, 2017.

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