WASHINGTON — Retailers and online sellers, including Neiman Marcus Group and Amazon.com, are lining up behind legislation introduced Wednesday that would enable states to collect sales taxes from out-of-state merchants regardless of whether they have a physical presence in the state.
The debate over taxing Web sales has taken place in Washington for more than a decade without any resolution, but brick-and-mortar retailers and a former opponent to online sales tax collection — Amazon.com — said lawmakers have now found the right solution.
“It is a win-win resolution,” Paul Misener, vice president of global policy at Amazon, wrote in a letter to the bill’s sponsors. “If enacted, your bill will allow states to require out-of-state retailers to collect sales tax at the time of purchase and remit those taxes on behalf of customers, and it will facilitate collection on behalf of third-party sellers. Thus, your bill will allow states to obtain additional revenue without new taxes or federal spending, and will make it easy for consumers and small retailers to comply with state sales tax laws.”
The bill, unveiled by Sens. Dick Durbin (D., Ill.), Mike Enzi (R., Wyo.) and Lamar Alexander (R., Tenn.), has 10 co-sponsors and has garnered letters of endorsement from Best Buy, the National Retail Federation, Retail Industry Leaders Association, International Council of Shopping Centers and Jewelers of America, according to Enzi.
Dubbed the “Marketplace Fairness Act,” the bill would simplify the tax system and provide states with two options to begin collecting sales taxes from online and catalogue purchases. The first option is to have states sign the Streamlined Sales & Use Tax Agreement of 1999, which was created in response to the 1992 U.S. Supreme Court case, Quill Corp. v. North Dakota, that said retailers are required to collect sales tax from out-of-state customers only if they have a “physical presence” in the customer’s state.
A total of 24 states have already permanently changed their tax laws and adopted the agreement, which requires out-of-state sellers to collect sales tax regardless of whether they have a physical presence in the state. But some states have been reluctant to sign onto the agreement. The new bill would give states a second option and allow those that don’t want to become members of the agreement to collect sales taxes only if they adopt certain minimum simplification requirements and provide sellers with additional notices on the collection requirements.
David French, senior vice president of government relations at the NRF, said the two-track approach in the new legislation is the “game changer” that will give momentum to the bill in Congress. Legislation introduced by Durbin in July essentially only covered states that sign the Streamlined Sales & Use Tax Agreement, and 21 states have not signed it.