The Senate has re-introduced a bipartisan bill aimed at making it easier for states to collect sales taxes on online purchases.
The legislation, known as the Marketplace Fairness Act, passed the Senate in 2013 but was stalled in the House. Several of the bill’s backers co-sponsored the latest iteration: Senators Dick Durbin, D-Ill., Mike Enzi, R-Wyo., Lamar Alexander, R-Tenn., and Heidi Heitkamp, D-N.D. They were joined Tuesday by several new co-sponsors: Senators Roy Blunt, R-Mo., Jack Reed, D-R.I., Bob Corker R-Tenn., Sheldon Whitehouse, D-R.I., and Angus King, Jr., I-Maine.
The Marketplace Fairness Act of 2015 would give states the option to require out-of-state businesses, such as those selling online or through catalogs, to collect and use taxes already owed under state law the same way local businesses do. It relies on the Streamlined Sales and Use Tax Agreement among states.
“The Marketplace Fairness Act is about supporting the jobs we have in our towns,” Enzi said in a statement. “It is about the people who are our neighbors who work in our local stores. Right now, thousands of local businesses are forced to do business at a competitive disadvantage because they have to collect sales and use taxes and remote sellers do not. The Marketplace Fairness Act would put Main Street businesses on a level playing field with online retailers. In 2013, the Senate passed this bill with bipartisan support. It’s time to give states the right to enforce their own laws without having to get permission from Washington.”
The bill passed on a bipartisan basis by a vote of 69 to 27 on May 6, 2013, but was never taken up by the House amid concerns that it would be seen by many consumers as raising taxes.
“We came close in the last Congress, but the bill was never acted on in the House of Representatives,” said Durbin. “I hope that in the 114th Congress we can do what’s right for businesses in Illinois and around the country.”
Although many states officially expect consumers to pay taxes for their online purchases, many Web sites do not try to collect taxes from out-of-state buyers and leave it up to the individual to declare the taxes on their annual tax returns. Few consumers do, however.
A 1992 decision by the Supreme Court established “nexus” rules for determining which merchants need to collect sales taxes from which purchasers, although a Supreme Court decision last week could pave the way for the Court to revisit the 1992 decision and its physical presence test if Congress doesn’t act (see Supreme Court Allows Challenge to Colorado Notice Requirements on Sales Tax Collection).
The National Retail Federation praised the re-introduction of the legislation. “We welcome this effort to level the sales tax playing field between Main Street merchants and online retailers,” said NRF senior vice president for government relations David French in a statement. “For far too long, brick-and-mortar retailers have faced a competitive disadvantage solely because of Congress’ inability to resolve the online sales tax disparity.Retailers should be allowed to compete for customers and sales on price, service and selection and not forced to compete on whether or not they collect state and local sales tax.The introduction of this legislation is a welcome sign that lawmakers may finally act on this retail industry priority, and builds upon ongoing activity in the House and Senate. It also comes on the heels of Supreme Court Justice Anthony Kennedy’s admission last week that the Court got it wrong on sales tax collection two decades ago and should revisit its decision. It is Congress’ responsibility to lay out a legislative framework on online sales tax collection and we hope that the introduction of this bill will spur congressional action to remedy this problem this year.”
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