Senators to Renew Push for Online Sales Tax Bill
By Kenneth Corbin
Once the Senate returns to Washington next week and begins work in the 113th Congress, lawmakers plan to renew the push for legislation that would permit states to require online sellers to collect sales taxes.
Though the timing is unclear at this early stage, particularly with official Washington in flux ahead of Monday's presidential inauguration, a spokesman for Sen. Mike Enzi (R-Wyo.), the author of the Marketplace Fairness Act, indicated that it won't be too long into the new session before the legislation will be back in play in the Senate.
"Senator Enzi plans to reintroduce the bill and will work with his colleagues to build support for this legislation," Enzi spokesman Daniel Patrick Head told EcommerceBytes in an email. "He hopes to see it finished this year."
In broad strokes, the Marketplace Fairness Act, like other similar bills that have been kicking around Capitol Hill in recent years, would authorize states that simplify their tax codes to compel out-of-state Internet sellers to collect and remit sales taxes on purchases shipped to their residents.
Proponents of such measures are quick to point out that in states with sales tax laws on the books, the tax is already owed: online shoppers are required to report untaxed purchases on their state returns. But as a practical matter, few do, and state tax officials complain that they can't realistically chase down the unpaid taxes on every online purchase that residents make. As a result, billions of dollars in revenue go uncollected each year.
The Marketplace Fairness Act would authorize (but not compel) states to shift the collection burden to online retailers.
"This bill simply says that you have the right to decide whether you will collect state and local sales tax from all of the people who owe or from some of the people who owe," Sen. Lamar Alexander (R-Tenn.), a backer of the bill, said in a recent speech to the Tennessee state legislature, according to a transcript provided by his office.
Jim Jeffries, a spokesman for Alexander, confirmed that the senator again plans to attach his name as an original cosponsor of the Marketplace Fairness Act, but declined to comment on the timing of the bill's introduction.
Proposals to empower states to compel online retailers to collect sales taxes have drawn support from both sides of the aisle, with many lawmakers positioning the issue as a matter of leveling the competitive playing field. After all, brick-and-mortar retailers have to collect the taxes, so don't their online rivals have an unfair advantage? Hence the bills in play in the last Congress bore names like the Marketplace Fairness Act, the Marketplace Equity Act and the Main Street Fairness Act.
The bills would seek to resolve an obstacle to online sales-tax collection that the U.S. Supreme Court created in 1992, when it ruled in a case involving a catalog company that a business must have a "physical presence" in a state, such as a store, office or warehouse, before that state can require the retailer to collect sales taxes. In its ruling, the court affirmed that the U.S. Congress could change the physical-presence requirement under its interstate commerce authority.
But many ecommerce advocates, most notably eBay, counter that new tax obligations would pose an undue burden on small sellers. Even with the requirements that states simplify their tax codes included in the Marketplace Fairness Act, critics have argued that the remaining state and local tax provisions would still be excessively complex.
Lawmakers have acknowledged the potential impact new sales tax requirements would have on small businesses, and offered provisions that would exempt the smallest sellers. The Marketplace Fairness Act, for instance, would have exempted sellers with less than $500,000 in remote sales as it was written last year, though some have called for a far higher threshold.
Representatives for Enzi and Alexander declined to comment on any changes the authors might make to the Marketplace Fairness Act ahead of its reintroduction this year.
About the author:
Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects since 2007, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn here.
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