WASHINGTON — Brick-and-mortar retailers, who have pushed for Internet sales tax fairness for over a decade, won a symbolic victory early Saturday morning.
This story first appeared in the March 25, 2013 issue of WWD. Subscribe Today.
It came when the Senate approved a nonbinding amendment that gives support to legislation that would enable states to collect sales taxes from out-of-state online and remote sellers — a top Congressional issue for retailers this year.
The amendment was added to a Senate budget blueprint for fiscal year 2014, which the Democratic-controlled Senate narrowly passed on a 50-49 vote around 5:00 a.m. Saturday morning.
It is the first budget proposal the Senate has passed in four years and sets the stage for work on actual budget legislation to fund the government when the new fiscal year begins on Oct. 1.
The nonbinding and largely symbolic budget blueprint called for nearly $1 trillion in new taxes over 10 years, combined with $975 billion in spending cuts. It would also end the $1.2 trillion in automatic spending cuts known as the “sequester,” which took effect earlier this month.
The Republican-controlled House approved a more austere budget plan on Thursday and did not include an Internet sales tax amendment.
A broad swath of the retail community hailed the passage in the Senate of the nonbinding amendment on online sales tax collection.
The amendment, offered by Sens. Mike Enzi (R., Wyoming), Dick Durbin (D., Ill.) and others, who are cosponsors of “The Marketplace Fairness Act” legislation, would establish a reserve fund in the federal budget and allow state and local governments to collect sales taxes from online and remote sellers, such as catalogue companies, that sell more than $1 million worth of products annually.
The vote on the amendment was essentially a test vote that gave the senators an indication of whether they have the 60 votes needed to overcome a filibuster by Republicans if the legislation comes up for a vote later this year.
It passed 75-24, which could prompt Senate leaders to get behind advancing legislation this year.
Michael P. Kercheval, president and chief executive officer of the International Council of Shopping Centers, said the vote on the amendment “clearly shows that there are enough votes in the Senate to pass…the Marketplace Fairness Act.
“The vote also sends a strong signal to Republicans and Democrats in both the House and the Senate that momentum for e-fairness legislation has been building since the end of last Congress,” Kercheval added.
“This is a critically important issue for retailers — both large and small — across the country,” said Matthew Shay, president and chief executive officer at the National Retail Federation. “Both brick-and-mortar stores and e-commerce leaders understand that the Marketplace Fairness Act is common-sense legislation dedicated to protecting states’ rights, strengthening our communities and preserving our free-market system.
Sandy Kennedy, president of the Retail Industry Leaders Association, said: “The overwhelming bipartisan vote in the Senate is proof positive that the federal government’s special treatment of online-only retailers will soon be a thing of the past.
“While we take nothing for granted, today’s vote opens many pathways to making the Marketplace Fairness Act law this year, leveling the playing field for Main Street merchants once and for all.”
The debate over taxing Web sales has taken place in Washington for more than a decade without any resolution, but states have been enacting their own laws to close what they say is a loophole created in 1992 in Quill v. North Dakota, a Supreme Court ruling that stated retailers were required to collect sales tax from out-of-state customers only if they have a “physical presence” in the customer’s state.
E-tailers have relied on that decision to avoid collecting sales tax on online orders. Brick-and-mortar retailers, including those with e-commerce sites, that are typically required to collect sales taxes in states where they have stores, argue that puts them at a competitive price disadvantage and have lobbied for federal legislation to resolve the issue.
A bipartisan, bicameral group of lawmakers introduced The Marketplace Fairness Act of 2013 in February, aimed at giving states the authority and option to collect sales taxes from out-of-state businesses in the 45 states that collect sales taxes, rather than rely on consumers to pay those taxes to the states. The legislation provides for a small seller exemption that prohibits states from requiring remote sellers with less than $1 million in annual nationwide remote sales to collect sales and use taxes.