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Marketplace Fairness in the Lame-Duck Session?

  • Sep 22, 2014 | Gail Cole

 Online sales tax in the lame-duck session?

Lawmakers must do something about online sales tax during the upcoming lame duck session. The Marketplace Fairness Act (MFA) must be addressed. So says Senator Majority Leader Harry Reid (D-NV).

MFA would grant states the right to require certain businesses to collect and remit sales tax, provided the states enact specific sales tax simplification measures and the businesses meet the sales thresholds. The United States Senate overwhelmingly approved the Marketplace Fairness Act of 2013 back in May 2013. Since then, the bill has inspired guidelines to frame the discussion of online sales tax and been the subject of hearings in the House Committee on the Judiciary, where it has made a home for itself. In other words, nothing much has happened.

From the outset, House Judiciary Committee Chairman Bob Goodlatte (R-VA) made it clear he did not support MFA. On May 6, 2013, the day the Senate passed the bill, Chairman Goodlatte expressed dismay that it “did not follow regular order in the Senate, but instead bypassed the Senate committee having the subject matter expertise. Consideration in the House will be more thoughtful.” He has been true to his word, keeping the legislation in committee for more than a year.

Meanwhile, many states now require out-of-state companies doing a certain amount of business in their state to collect and remit sales tax. These laws tend to base the right to collect tax on affiliate, or click-through, nexus, which is a variation on nexus—the physical connection between a business and a jurisdiction that triggers a sales tax obligation. The states argue that businesses do have a connection to the state through the internet and links on websites owned by in-state businesses.

Senator Reid is optimistic that the issue can be resolved during the lame-duck session: “We have to do something about Marketplace Fairness. That’s long, long overdue. And we’re going to do whatever it takes to get that done.”

Republican Senators Ted Cruz (R-TX) and Mike Lee (R-UT) are equally determined “to stall any nonemergency legislation taken up in the lame-duck session.” They argue that lawmakers voted out of office have no accountability after the election and therefore should not legislate.

Anything can happen—or not happen—at the national level. At the state level, the trend is moving towards taxing remote sales. Is your business prepared?

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photo credit: Bunnyrel via photopin cc

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
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.