A group of senators has introduced a bipartisan bill governing sales taxes on online purchases and Internet access after previous legislation failed to make progress in the House.
The Marketplace and Internet Tax Freedom Act was introduced by Senators Mike Enzi, R-Wyo., Dick Durbin, D-Ill., Lamar Alexander, R-Tenn., Heidi Heitkamp, D-N.D., Susan Collins, R-Maine, and Mark Pryor, D-Ark. The bill aims “to restore states’ sovereign rights to enforce state and local sales and use tax laws.” Like its predecessor, the Marketplace Fairness Act, the bill relies on the Streamlined Sales and Use Tax Agreement, which 24 states and the District of Columbia have signed. The Marketplace Fairness Act, which was backed by several of the same senators, passed in the Senate last year, but has failed to make progress in the House (see Marketplace Fairness Act Stalls in Congress).
The bill also includes elements of the Internet Tax Freedom Act, which prohibits states from taxing Internet access and has been regularly renewed over the years. A bill that permanently prohibits states from taxing Internet access was passed in the House on Tuesday (see House Passes Bill Permanently Banning Internet Access Taxes). The Senate bill would extend the ban for 10 years. By combining provisions of the bill that passed the House with elements of the Marketplace Fairness Act that passed the Senate, the Senate backers of the legislation hope to force the House to finally take action on the online sales tax law.
The Marketplace and Internet Tax Fairness Act would limit the ability of state and local governments to impose Internet access taxes for 10 years, while giving states the ability to enforce their sales tax laws on businesses selling to consumers located within their borders.
Under the new bill, each member state under the Streamlined Sales and Use Tax Agreement would be authorized to require all sellers who don’t qualify for a small seller exception to collect and remit sales and use taxes with respect to remote sales sourced to that member state pursuant to the provisions of the Streamlined Sales and Use Tax Agreement, but only if any changes to the Streamlined Sales and Use Tax Agreement made after the date of the enactment of the law are not in conflict with the bill’s minimum simplification requirements.
A state that is not a member state under the Streamlined Sales and Use Tax Agreement would be authorized to require all sellers not qualifying for the small seller exception described in subsection to collect and remit sales and use taxes with respect to remote sales sourced to that state, but only if the state adopts and implements minimum simplification requirements.
The National Retail Federation and the International Council of Shopping Centers both expressed support for the bill.
“The National Retail Federation applauds the introduction of this bipartisan piece of legislation that seeks to level the playing field between local, brick-and-mortar merchants and online retailers without creating or raising taxes,” said NRF senior vice president for government relations David French in a statement. “We appreciate the leadership of the bill’s sponsors and thank them for renewing their commitment to sales tax fairness. The retail industry has rapidly evolved over the last two decades with e-commerce and mobile commerce, and it is time for Congress to eliminate the sales tax disparity, which disproportionally impacts community and independent retailers.”
"The Senate is sending a clear signal that this issue needs to be dealt with now," said Betsy Laird, senior vice president of Global Public Policy for the ICSC. "Twenty-first century retail demands a 21st century solution. This is the second time in a little over a year that the Senate has proposed common-sense, bipartisan legislation to the decades-old problem that has distorted the marketplace. The time for efairness is now."
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