Senate approves online sales tax bill, House next stop for Marketplace Fairness Act proponents

WASHINGTON — The U.S. Senate on Monday passed the Marketplace Fairness Act, which would enable states to collect sales tax on online transactions, to widespread applause from big-box retail. If passed the act would remove the up-to 7% price advantage out-of-state online retailers have over brick-and-click or brick-and-mortar retailers operating and collecting sales taxes within the state. (For a comprehensive list of state sales taxes, click here.) 

For national omnichannel retailers like Walgreens, CVS and Rite Aid, this bill may push the value quotient back to convenience and service over strictly price. Online-only retailer has also placed its support behind this bill, according to published reports, as the virtual big-box retailer contemplates expanding into other states with distribution centers to enable faster delivery speeds. 

“This legislation would modernize sales tax policy to reflect the marketplace as it exists today,” stated Steve Anderson, president and CEO for the National Association of Chain Drug Stores. “When it comes to updating this outdated policy, every day of inaction is another day of discrimination against brick-and-mortar retailers. NACDS commends the Senate for true leadership in recognizing a necessary change for fairness and fiscal responsibility.”

However, smaller retailers who have extended their market reach into other states by way of the Internet stand in marked opposition to the legislation, claiming that the additional cost in collecting the state taxes could put them out of business. 

The measure would give states the ability to require retailers with more than $1 million in annual sales to collect state and local sales taxes for online purchases. Currently, the law requires an online retailer to collect sales tax only on products shipped to states in which the retailer has a physical presence, including a store or a distribution center, and places the collection onus on the consumer. Consumers are required to file "use taxes" for those online purchases where they did not pay a state sales tax. But few consumers ever do.

The National Conference of State Legislators estimates that the current laws prevented states from collecting $23 billion in sales tax revenue.

“The law and its interpretation by the courts date back to the pre-Internet era,” Anderson said. “There is no way the Marketplace Fairness Act can be labeled a ‘new tax’ with a straight face. It is a long-overdue application of existing sales tax laws. The only thing new here is fairness.”

The legislation has now moved to the House of Representatives, where a bill sponsored by Reps. Steve Womack, R-Ariz. and Jackie Speier, D-Calif., has generated strong bipartisan support, according to the Retail Industry Leaders Association. It currently has more than 60 House cosponsors, the association noted.

“For too long the Main Street retailers that are an integral part of their communities have faced tax rules that put them at a disadvantage to their out-of-state, online-only competitors," commented Bill Hughes, RILA SVP government affairs. "The Senate has voted to ensure that the market, not government, determines winners and losers,” he said. “We are confident the House will reach the same conclusion." 

The Food Marketing Institute also stated its support for the Senate action. “The current state of inconsistent sales and use tax collection in the United States makes legislation like the Marketplace Fairness Act a necessity,” commeted Jennifer Hatcher, SVP government and public affairs for FMI. “The bill simply makes it clear that states have the authority to require online retailers to collect sales and use taxes, as long as the state complies with simplification requirements designed to ease the burden of collection on retailers.”

Login or Register to post a comment.