Published on March 27, 2014

Support grows for online tax issue

Marketplace Fairness Act

WASHINGTON (March 27, 2014) — Several trade and political groups, including the Tire Industry Association (TIA), are supporting “marketplace fairness” legislation that would require online retailers to collect sales taxes for every state to which they ship goods.

Other supporters include the National Governors Association (NGA) and other retail associations.

Despite the bill’s having passed the Senate last spring, the chairman of the House committee with oversight over the bill said he believes the legislation creates more problems than it solves.

The legislation—S. 743—known as the Marketplace Fairness Act, would overturn a 1992 Supreme Court ruling that forbids states from collecting taxes from companies that don’t have a physical presence in those states.

The bill enjoys broad support both from state legislatures that claim they lose $23 billion in taxes every year from Internet sales, and from traditional retailers who say the tax situation gives Internet merchants an unfair advantage.

S. 743 passed the Senate in May 2013 by a 69-27 vote. In advance of a March 12, 2014, hearing on solutions to Internet sales tax issues before the House Judiciary Committee, the NGA reiterated its long-standing support for the bill.

(goodlatte.house.gov photo)
Bob Goodlatte

“Marketplace Fairness upholds the principles of federalism and levels the playing field between Main Street and E-street,” the NGA said. “This legislation means that the corner stores would be on the same footing with the online retailers; fair competition means more choices for consumers.”

Any federal legislation on Internet sales taxes, the NGA said, should:

• Grant states clear authority to require online retailers to collect sales taxes;

• Preserve states’ ability to develop and maintain their own revenue systems; and

• Avoid provisions that would circumvent compliance with state tax laws.

In his opening statement at the hearing, House Judiciary Chairman Bob Goodlatte, R-Va., said he sympathized with traditional retailers and wanted to help them find a solution to the Internet tax situation.

However, Rep. Goodlatte said, the Marketplace Fairness Act is a flawed solution to a complex problem.

“The public still views the bill as taxing the Internet,” Rep. Goodlatte said. A June 2013 Gallup poll showed 57 percent of all Americans and 73 percent of young Americans opposed it, he said.

The bill requires states to provide online retailers with free compliance software, but does not address integration costs, according to Rep. Goodlatte. The estimated costs of complying with more than 9,600 state and local taxing jurisdictions vary widely, and the bill also exposes online retailers to multiple audits in jurisdictions in which they have no voice, he said.

The House Judiciary Committee has not scheduled any further action on the Marketplace Fairness Act, according to THOMAS, the congressional legislative website.

A website in support of the Marketplace Fairness Act has been set up by TaxCloud, https://taxcloud.net/ a sales tax service for online retailers.

To reach this reporter: mmoore@crain.com.

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