PublishedOctober 20, 2011

Another Bill To Tax Online Sales Introduced In House

Last week saw the introduction in the U.S. House of Representatives of another bill aimed at requiring online retailers to collect sales taxes from customers regardless of whether they have a physical presence in that state.  This latest bill, H.R. 3179 (the Marketplace Equity Act), was introduced by Rep. Steve Womack (R-AR) and Rep. Jackie Speier (D-CA).  It is similar to the Main Street Fairness Act introduced in July by Sen. Dick Durbin (D-IL) in the Senate and by Rep. John Conyers (D-MI) in the House.

CCIA expressed its opposition to the Main Street Fairness Act because it would, in the name of “fairness”, effectively force electronic commerce to conform to a tax framework established on geographic location and physical presence, negating the advantages and benefits derived from innovation.  The Marketplace Equity Act differs in that it sets forth certain simplification requirements that states would have to satisfy.  These requirements include:

  • A single tax base and exemption structure throughout the state;
  • A small seller exemption of $1 million in yearly national remote sales or $100,000 within the state;
  • Rate structure to be (a) single statewide blended rate (state rate + local rate); (b) maximum state rate; or (c) applicable destination rate.  (c) would retain the different local jurisdictional rates but in this case, the State would have to make available adequate software to remote sellers that substantially eases the collection burden.

While this is more specific than leaving it up to the Streamlined Sales Tax Project as the Main Street Fairness Act does, the objective is the same in that it seeks to unfairly place a compliance burden on online retailers for daring to utilize a new legitimate business model that does not fit well with a sales tax system based on physical location.  It is neither fair nor equitable to blame innovators for the strain caused by trying to stuff a 21st century business model into a 20th century tax framework.  State governments find themselves in dire budgetary straits and it is understandable for them to be seeking new revenue.  However, their policies should be aimed at fostering innovation and progress rather than a parasitic quest for a convenient cash cow.

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