The U.S. Senate is set to vote Monday on the Marketplace Fairness Act of 2013, which essentially seeks to tax online sales. Supporters and opponents of the Act have turned up the lobbying heat prior to the vote.
Arguments have touched on the hot buttons of patriotism, jobs, and the need for a level playing field. Amazon.com, once a fierce opponent to the idea of taxing online sales, has done a 180-degree turn and now supports the issue.
The Act has drawn widespread support from politicians, businesses and trade associations, as well as the AFL-CIO and the American Conservative Union. Opponents include eBay; the We R Here Coalition, whose members are small business retailers; some conservative senators; and conservative organizations such as the Heritage Foundation and FreedomWorks, the voice of the Tea Party.
Two similar copies of the bill, one in the Senate and the other in the House of Representatives, are wending their separate ways through Congress.
What the MFA Would Do
The Act gives states the authority to compel online and catalog retailers to collect sales taxes at the time of a transaction, and remit those taxes to the states where the buyers are located.
Before doing so, states must simplify their sales tax laws. They can either join the 24 states that have already voluntarily adopted the simplification processes laid out in the Streamlined Sales and Use Tax Agreement (SSUTA), or they can meet five mandates for simplification that have been spelled out in the bill.
Those mandates are that the states agree to notify retailers in advance of any rate changes within the state; designate a single state organization to handle sales tax registrations, filings and audits; establish a uniform sales tax base for use throughout the state; use destination sourcing to determine sales tax rate, meaning the tax is calculated based on the purchaser’s home state and the money is remitted to that state; and provide free software for managing sales tax compliance, holding retailers harmless for any errors that result from relying on state-provided systems and data.
Businesses with less than US$1 million in gross annual receipts from domestic online sales will be exempt from the provisions of the act.
The bill “seeks to modernize the tax code for 21st century commerce by allowing states authorization to require all sellers, regardless of selling channel, to collect and remit sales taxes from consumers that are due,” Best Buy spokesperson Paula Baldwin told the E-Commerce Times.
However, the act will open the door for small retailers to be audited by every state. “In many cases, small businesses will be subject to audit and enforcement by all the states, where today they can only be audited and face enforcement by their own state,” Brian Bieron, senior director of global public policy for eBay told the E-Commerce Times.
Comments on the Act
Best Buy “strongly supports the bill to level the playing field between multichannel retailers and online-only retailers,” Baldwin said. Online-only retailers currently don’t collect sales tax, giving them “a 5-10 percent price competitive advantage.”
Amazon’s shift in stance lets it build distribution warehouses in states where it collects and remits taxes, so brick and mortar retailers “will compete on service as well as price, carry different lines of products or offer services or amenities that Amazon doesn’t have,” Malachy Kavenagh, a spokesperson for the International Council of Shopping Centers (ICSC) told the E-Commerce Times. ICSC supports the Act.
“Large traditional retailers and their trade associations have long supported expanding the tax collection burdens of smaller innovative retailers, and states have historically wanted to have the power to enforce tax collection powers out of state, and that predates the Internet,” eBay’s Bieron said.
Amazon.com spokesperson Mary Osako pointed the E-Commerce Times to testimony company vice president Paul Misener gave to Congress in August, and to a letter from Misener to sponsors of the bill. Osako declined to comment for this story.