‘Marketplace Fairness Act’: Example of what Washington does best
by Don McKee
May 08, 2013 12:12 AM | 1919 views | 4 4 comments | 10 10 recommendations | email to a friend | print
Don McKee
Don McKee
Senate Bill 743, ingeniously titled “Marketplace Fairness Act of 2013,” has an even more high-faluting preamble: “To restore States’ sovereign rights to enforce State and local sales and use tax laws, and for other purposes.”

The other purposes consist mainly of raising tax revenues for state and local governments, and protecting brick-and-mortar retailers.

This “fairness” legislation, more accurately known as the Internet sales tax bill, passed the U.S. Senate on Monday. It would allow states to collect billions of dollars in sales taxes on Internet purchases by consumers in other states.

Every business with more than $1 million in annual online sales would have to collect the state sales taxes from customers and remit the money to the 46 states that impose sales taxes — a nightmare scenario for many small online businesses.

Under current law, a retailer must have a store, office or distribution center in a given state for that state to collect sales tax on Internet sales.

Thus, the major brick-and-mortar retailers operating nationwide collect taxes on Internet sales, but online retailers such as Amazon only collect sales taxes in states where they have offices or distribution centers.

That’s the issue with the supporters of tax-everything claiming that tax-free Internet sales are driving the brick-and-mortar retailers out of business.

It’s all about “fairness,” according to one of the bill’s sponsors, Republican Sen. Mike Enzi of Wyoming. “It’s about leveling the playing field for brick-and-mortar shops,” he said.

In fact, it would flat out level some online businesses, opponents say.

It would bring tons of compliance work and paperwork — “a huge, additional compliance nightmare that we’ve got to deal with,” said Kevin Hickey of Online Stores that has annual sales of $30 million but expects profits of only about $400,000 this year.

Hickey told CNN his Pennsylvania-based business would have to “be charging more, so we’ll lose revenue and have higher costs.”

Georgia Sens. Saxby Chambliss and Johnny Isakson both voted for the tax bill which passed 69-27. On a critical cloture motion April 25 to shut off debate and bring the bill to the floor, Chambliss voted no and Isakson voted yes in a very close 63-30 vote.

Four more negative votes would have blocked the bill. In the final vote, Republican senators split almost down the middle with 22 voting no along with five Democrats and 19 Republicans voting yes to pass the measure.

States have long been hungrily eyeing the prospect of taxing Internet sales that hit $226 billion last year in the United States, a 16 percent increase over 2011.

States “lost” $23 billion last year because they could not collect on out-of-state sales from the Internet, catalogs, mail orders and telephone orders, according to the National Conference of State Legislatures that supports the tax bill.

Consumers should have known this was coming. It was not a matter of if, but when. After all, it’s what they do best in Washington — tax people.

Comments-icon Post a Comment
Keith Yockey
August 08, 2013
The $23B is a false number. It comes from a University of TN study that assumes no online sales tax has ever been paid. Fact is, 83% is already collected via BigBox online retail. The actual number Congress is chasing is less than $2B. Compliance costs will be more than the tax collected.
August 07, 2013
Of course internet sales should be taxed. Why do internet based companies get an advantage over brick and mortar businesses, by sales tax abatement?! It is hard to feel sorry for these internet companies because they will now have to comply with the same paperwork and headaches of collecting sales tax on purchases. Every other business in America has been doing that since the beginning of time! Internet companies should support their public works, public safety, education, transportation by tax revenue - just like everybody else does!
August 07, 2013
Sorry you feel this way Chris currenly online and retail both pay sales taxes to the state they live in or have a warehouse or office. Is forcing Internet sellers to collect 45 more State taxes and sending returns ever month 46 States x 12 months = 540 times a year is this and you think this is "Fair" your local seller one has 1 State x 12 months = 12 reports per year.
mad hatter
May 08, 2013
I am furious about this and so are a lot of others. You are right on target, Mr. McKee and I am sure votes like this are going to affect upcoming elections. I am a Republican but am finding that some of them are not trustworthy. For every wishy-washy vote they cast, it helps the Libertarians. Tea Partiers, by the way, are up in arms.
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