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Washington Retail Insight

NRF Urges Senate to Support Sales Tax Fairness

By J. Craig Shearman
Washington Retail Insight
April 25, 2012

NRF today urged a Senate committee examining federal tax reform to support legislation that would require Internet retailers to collect sales tax the same as local merchants.

“As retailing evolves and Internet sales become a more prominent portion of total retail sales, it is critical that Congress address the sales tax collection discrimination that exists between brick-and-mortar and remote retailers,” NRF Senior Vice President for Government Relations David French said. “Brick-and-mortar retailers are major contributors to the health of local communities and should not be placed at a disadvantage compared to remote sellers that have no local presence.”

French’s comments came in a written statement submitted to the Finance Committee, which held a hearing this morning on the impact federal tax reform could have on state and local tax and fiscal policy.

Of three bills pending in Congress that would give states authority to require out-of-state sellers to collect sales tax from their residents, French urged that Congress pass S. 1832, the Marketplace Fairness Act, sponsored by Senator Michael Enzi, R-Wyo. French praised the “hybrid structure” of the bill, which gives states that want to participate the choice of adopting the long-pending Streamlined Sales and Use Tax Agreement or a more limited set of simplifications included in the bill.

French noted that local retailers create jobs and pay state and local taxes. In addition to having to charge higher bottom-line prices because of sales tax, French said collecting the tax costs local stores administrative expenses averaging about 3 percent of the amount collected.

French said sales tax fairness legislation would not only level the playing field between retailers but also ease the burden on cash-strapped states that are currently losing an estimated $24 billion a year to untaxed purchases their residents make from out-of-state sellers. Recouping that revenue would help support essential local services such as teachers, police officers, firefighters and ambulance crews.

Enzi was scheduled to speak at the hearing, but submitted a written statement instead because of a conflicting vote on other legislation.

“I strongly believe that now is the time for Congress to act,” Enzi said. “For over a decade, Congress has been debating how to best allow states to collect sales taxes from online retailers in a way that puts Main Street businesses on a level playing field with online retailers. The Marketplace Fairness Act empowers states to make the decision themselves.”

Senator Ben Cardin, D-Md., highlighted the importance of passing sales tax fairness legislation as a “matter of tax integrity.” The availability of computer software to calculate what tax is owed makes previous issues of the complexity of conflicting sales tax laws across the country a moot point, he said.

Online sellers are already required to collect sales tax from customers in their own states, but congressional action is needed because of a 1992 U.S. Supreme Court ruling. The court ruled in Quill v. North Dakota that retailers are required to collect sales tax from out-of-state customers only if they have a physical presence such as a store, warehouse or office in the customer’s state. The court held that the 45 state and 7,600 local sales tax systems across the nation were too complicated for a retailer to otherwise know how much tax to collect.

© 2012 National Retail Federation

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