Washington—The U.S. Senate received rare raves this week when a bi-partisan majority of 69 senators voted for the passage of The Marketplace Fairness Act, which would require e-commerce sites to collect sales taxes just like brick-and-mortar retailer do.
While the Senate vote was hailed by a vast array of retail industry trade associations, it still must pass the House of Representatives which is dominated by conservative Republicans, many of whom oppose any form of tax hikes.
“For the past two decades, the retail environment has dramatically changed. To keep pace with those changes, our laws must evolve,” said Betsy Laird, senior vice president of global public policy at International Council of Shopping Centers. “The Senate acknowledged this through the passage of this legislation and we now look to the House to continue the momentum and bring H.R. 684 to a vote.”
And while the bipartisan support in the Senate sends a strong message to the House, the bill still faces an uphill battle. Similar to the Senate bill, the House version was introduced by Representatives Steve Womack (R-AR) and Jackie Speier (D-CA) and enjoys some 60 House cosponsors.
But the bill first must past through the House Judiciary Committee where Chairman Bob Goodlatte (R-VA) has expressed doubts about the Senate bill.
Anti-Tax Activists Oppose the Measure
Conservative groups have targeted the bill as a “a classic example of big business and big government colluding to screw the little guys – in this case, small online retailers and price savvy consumers trying to avoid the outrageous exactions of state governments that have been shifting the tax burden away from property taxes to sales taxes,” as Conservative HQ stated.
Indeed, passage of the bill, which is supported by President Obama, would mean that states could receive the estimated $23 billion in uncollected sales tax revenue from online sales.
“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. The Senate has voted to ensure that the market, not government, determines winners and losers,” said Bill Hughes, senior vice president for government affairs for Retail Industry Leaders Association. “We are confident the House will reach the same conclusion.”
Most retailers support the bill including online behemoth Amazon.com. On the other hand, eBay is strongly against the bill citing its many sellers do more than $1 million in out-of-state business every year. In a letter to eBay sellers, eBay CEO John Donahoe suggested the law should exempt any business with fewer than 50 employees or that make less than $10 million a year on out-of-state sales.
Other opponents, especially Tea Party conservatives and anti-tax activist claim the law would actually hurt online businesses if enacted. Smaller businesses that make more than the $1 million threshold claim it could still be costly to integrate a new accounting system, even with the proposed simplifications.
“This legislation is all about fairness,” says Michael Kercheval, president and chief executive officer of the International Council of Shopping Centers. “When lawmakers debate this bill, they usually start by saying, ‘I understand this is not fair and something needs to be done about it.’ ”
Proponents of the bill point out that there’s a current patchwork of various state and local laws on e-commerce, and although technically e-tailers are supposed to collect sales tax for many locations, few do. In California, for example, only 1.4% of online transactions included the required sales tax.
Should the Marketplace Fairness Act become federal law, each state would still have to meet some requirements before they can compel companies to pay state sales tax. They must simplify their tax processes and creating a single entity for collecting state taxes.