Based on the prior sales tax registration work our team was engaged, it is apparent that remote sellers, and especially foreign remote sellers, have struggled to comply with states’ sales tax registration requirements. Simplifying sales and use tax registration and collection requirements will go a long way in helping remote sellers, including foreign remote sellers, to comply with increasingly complex state sales tax requirements that have proliferated in the aftermath of Wayfair. Remote sellers face rigid penalties if they fail to register with the states and yet are prohibited from doing so because of the states’ legacy systems that prevent registration by foreign entities. Arizona’s measure, if passed, will help improve tax compliance around the United States, and hopefully businesses will incur fewer penalties and face fewer administrative hurdles as a result. Accordingly, requesting sales tax compliance simplification is long overdue and Arizona appears to be taking a step in the right direction.
Second, Arizona has also advanced a bill that would create a separate office, the Arizona E-Commerce Compliance Office (AECO), for the sole purpose of monitoring the Arizona Department of Revenue and ensuring that the Department complies with the U.S. Constitution’s Commerce Clause limitations on taxing interstate activity. While a separate office to monitor the Department’s regulations and tax practices would be a step in the right direction, it remains to be seen whether the proposed legislation gets any traction.
Pillsbury SALT is closely monitoring these developments and will report back with further updates.