Newsletter

February 15, 2013 - Lawmakers Hope New Bill Will Bring Victory in Fight for Sales Tax Fairness

A bipartisan group of more than 50 lawmakers introduced legislation in the House and Senate this week that could help retailers finally win their years-long battle to require online merchants to collect sales tax the same as brick-and-mortar stores.

“For over a decade, congressional inaction has created one of the largest tax loopholes of our lifetime,” said Senator Michael Enzi, R-Wyo., the lead Senate sponsor of the Marketplace Fairness Act of 2013. “It’s time to stop discriminating through the tax code and put local and Main Street retailers on a level playing field with their out-of-state and online counterparts.”

“Small businesses and states alike are suffering from the inability to collect … taxes from purchases made online,” said Representative Steve Womack, R-Ark., the lead House sponsor. “The Marketplace Fairness Act is the bipartisan, bicameral, common-sense solution that promotes states’ rights and levels the playing field for our Main Street businesses rather than continuing to allow the government to pick marketplace winners and losers.”

“For far too long, local retailers and small business owners have been saddled with a competitive disadvantage with online retailers,” NRF Senior Vice President for Government Relations David French said. “As e-commerce and mobile commerce continue to increase in market share, it’s time Congress allows retailers to compete on the same playing field.”

The legislation would give states that agree to simplify their sales tax laws authority to require out-of-state sellers to collect tax on sales to their residents the same as local stores. Under a 1992 U.S. Supreme Court ruling, sellers are currently required to collect sales tax only in states where they have a physical presence such as their headquarters, a store or distribution center. The court said sales tax laws across the country were too complicated for retailers not doing business in a state to know what to charge.

Similar measures have been introduced in each session of Congress since at least 2002 but early versions were criticized for requiring states to make too many changes. As recently as last year, three versions were competing in the House and Senate, dividing support.

On Thursday, a single version was introduced in each chamber, with 37 total sponsors in the House and 20 in the Senate. States would have a choice of adopting the comprehensive Streamlined Sales and Use Tax Agreement originally required or an alternative set of simplification requirements as proposed in recent versions. Small businesses with less than $1 million in annual sales would be exempted, up from $500,000, and states, not retailers, would pay for software that would tell online retailers how much sales tax to collect and route it to the appropriate tax agency.

Introduction came as NRF joined other groups in forming the Marketplace Fairness Coalition to push for passage of the measure.

© 2012 National Retail Federation