Marketplace Equity Act of 2011 Introduced

The International Council of Shopping Centers (ICSC) has spoken out in support of the bipartisan Marketplace Equity Act (MEA)(H.R.3179) introduced in Congress last week. The bill, sponsored by Representatives Steve Womack (R-AR) and Jackie Speier (D-CA) provides an alternative to the Main Street Fairness Act introduced earlier this year.

The MEA will still require simplified filing for online retailers in the form of a single “…revenue authority within the State with which remote sellers are required to file the return.” It also provides for a small seller exception where small sellers is defined as “…not exceeding $100,000 (or such greater amount as determined by the State)” for in-state sales and no more than $1,000,000 nationally. That number also may be modified on a state-by-state basis at the state’s discretion.

In addition to filing and small seller exception, the MEA defines the sales tax rate structures allowed for remote sellers (pick one):

  • a single State-wide blended rate;
  • a “…maximum State rate, which is the highest rate at which sellers are required by the State to collect tax, exclusive of tax imposed by…local jurisdictions”; or
  • an applicable destination rate that includes the local jurisdiction rate.

The latter option gets a bit more complex as in order to apply the applicable destination rate, the State must provide ways that online retailers can be relieved of the greater burden of tracking the sales tax information.

Most states require use tax to be paid on a purchase made through online shopping or mail-order catalogs. Sales tax is still due, even if the online or catalog retailer does not charge and collect the tax (called a “use tax” when the consumer must pay it directly to the state).

According to PRNewswire, when “…it falls to the consumer to report that tax directly to the state…

[it] is often not done. This practice has given rise to the misperception of tax-free shopping online, and efforts to close the loophole are often mistaken for a new tax.”

The MEA, as written, introduces the idea that each State may create a special rate (see bullet #1 above) or apply the maximum allowable rate (see bullet #2), rather than apply the actual combined rate that includes the local jurisdiction rates (see bullet #3).
However, in section 4 (b), the bill states, “No Effect on Nexus—No obligation imposed by virtue of the authority granted by section 2 shall be considered in determining whether a seller has a nexus with any State for any other tax purpose.” But section 2 (b) clarifies the intent of the bill by declaring that each State “…is authorized to require all sellers not qualifying for the small seller exception to collect and remit sales and use taxes with respect to remote sales into the State without regard to the location of the seller.”

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