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Will Online Sales Tax Be Included in 2014 National Budget?


 Will Federal Lawmakers Include Internet Sales Tax Legislation in the 2014 Budget?

UPDATE, 3.22.2013: The Senate voted 75-24 in favor of a non-binding (symbolic) measure empowering states to enforce online sales tax. This signals that such a bill may pass if the Senate considers binding legislation later this year.

The Marketplace Fairness Act of 2013, which would allow states to require online retailers to collect and remit sales tax, may be included in the Senate 2014 budget proposal -- symbolically. Senator Mike Enzi (R-Wyoming) has said that a symbolic positive vote would "express the Senate's support for leveling the playing field between brick and mortar retailers and online sellers."

The Senate Democratic budget resolution doesn't actually become law. A vote on online sales tax would instead be "an opportunity for the lawmakers to finally show they have enough votes to pass a measure and test to the momentum that had gathered at the end of the last Congress." A positive vote "could lay the ground work for a vote on a separate measure or, possibly an amendment to a bill that could pass both chambers." (The Hill).

Marketplace Fairness had a groundswell of support from lawmakers, retailers, and governors when it was introduced to the house and senate in February. Some of that enthusiasm has waned in the last month, and proponents are eager to keep the legislation alive.

Senators Mike Enzi (R-Wy) and Dick Durbin (D-Ill), who sponsored the legislation, "are expected to offer an amendment to a Democratic budget resolution this week that … is intended to usher in the first national Internet sales tax." The Wall Street Journal reports that an amendment is expected to be filed Friday. A non-binding vote would follow.

If more than 60 lawmakers support the amendment, it would bode well for future legislation. Jason Brewer, vice president for communications and advocacy for the Retail Industry Leadership Association (RILA), notes that a filibuster-proof majority would send "a message for the Senate leadership and the bill sponsors that the support is there and it’s ready to move forward.” RILA supports the legislation. (Wall Street Journal).

For

Those in favor of the legislation note that "online retailers that don't always collect taxes are unreasonably depriving state governments of revenue and enjoy an unfair competitive advantage over big box retailers that do collect taxes." (CNET).

The National Retail Federation, "the world's largest retail association and the voice of the retail world," submitted a letter to the members of the United States Senate on March 19 that urges senators "to vote in favor of the Enzi amendment in support of S. 336, the Marketplace Fairness Act, to the Concurrent Resolution on Budget for Fiscal Year 2014."

The letter underscores that as "digital commerce becomes a more prominent portion of total retail sales, it is critical that the tax laws do not discriminate between similar businesses based on how their products are distributed." The Marketplace Fairness Act of 2013 would level the playing field while protecting small businesses from "complicated laws in other states… ."

In short, the letter concludes, Marketplace Fairness is "a commonsense piece of legislation necessary to modernize our federal and state understanding of sales tax laws so that they can keep current with real world change in the marketplace."

Against

Yet Marketplace Fairness legislation has detractors. There are approximately 10,000 tax jurisdictions in the country, "each with its own rules and ability to conduct audits." Those against the legislation note that "complying with all of those [jurisdictions] as a small retailer is not a trivial task." (CNET).

Two lawmakers have voiced concerns over the measure. House Judiciary Chairman Bob Goodlatte (R-Virginia) said in a statement, “I do not believe legislation like the Marketplace Fairness Act is sufficiently simplified yet. While it attempts to make tax collection simpler, it still has a long way to go." He's open to discussing the issue, but stresses that many details still need to be addressed (WSJ).

Senate Finance Chairman Max Baucus (D-Montana) is against the legislation because, he says, "this amendment isn't just bad for Montana businesses, but small businesses across America." Montana does not have a state sales tax (WSJ).

Opposition also exists outside of the capitol. An article in Red State argues that "[t]here is no good way of collecting e-commerce sales taxes across state lines without growing government, creating even worse market distortions, and hurting low tax red states." The Marketplace Fairness Act would "overcorrect the problem and hurt online vendors." Online vendors "would incur the cost of the new regulatory burden of complying with the myriad of tax codes…" which would kill jobs and raise the cost of goods.

The National Taxpayers Union is also against the legislation, as is eBay, W R HERE (an association of small Internet sellers), and NetChoice, which includes AOL, Facebook, Living Social, and Yahoo (CNET).

Is your business prepared for online sales tax?


Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.