WASHINGTON — The battle to close what many advocates say is an Internet sales tax loophole was revived on Capitol Hill on Tuesday.
A group of bipartisan senators introduced a bill, dubbed the Marketplace Fairness Act, which allows states to collect taxes on online and other remote sales in the 45 states and the District of Columbia that collect sales tax whether they have a physical presence in the state or not. It also 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.
The new legislation, led by Sens. Dick Durbin (D., Ill.) and Mike Enzi (R., Wyo.), is similar to a bill the Senate passed in May 2013 that later stalled in the House.
Retail groups have been pressing Congress to pass legislation for several years.
Congress has been unable to find a resolution on the issue of taxing Internet sales, as 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 such as eBay and others that don’t have distribution centers or offices in a certain state have relied on that decision to avoid collecting sales tax on online orders. Brick-and-mortar retailers argue that puts them at a competitive price disadvantage.
“We welcome this effort to level the sales-tax playing field between Main Street merchants and online retailers,” said David French, senior vice president of government relations at the National Retail Federation. “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. 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.”
Joe Rinzel, senior vice president for government affairs at the Retail Industry Leaders Association, said: “Ending the special tax treatment afforded to online-only retailers has been a top legislative priority for the retail industry and it’s time to finish the job in 2015. All retailers deserve a fair shot to compete in the free market without the government’s thumb on the scale.”