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States Lose Patience Over US Internet Sales Tax

by Mike Godfrey, Tax-News.com, Washington

21 November 2014


The National Conference of State Legislatures (NCSL) has sent a letter to House of Representatives Speaker John Boehner (R – Ohio), expressing its "disappointment and frustration" with his announcement ruling out passage of the Marketplace Fairness Act (MFA) during the current lame-duck session in the US Congress.

"With all due respect," the NCSL wrote, "legislation to give states the authority to require the collection of sales taxes by remote sellers has been under review by the Judiciary Committee for more than 12 years and the subject of numerous hearings. In this Congress, MFA legislation has sat in the Judiciary Committee for 19 months."

It pointed out that "job-creating brick and mortar stores struggle to compete against remote retailers, who enjoy tacit congressional approval of their unfair advantage. The time for consideration and adoption of this important legislation is now, 12 years of congressional consideration and debate is enough."

The NCSL also estimated that, in 2012, "states lost an estimated USD23bn because of uncollected sales taxes from remote transactions."

It concluded that "Congress should not be deciding winners or losers in the marketplace, it must treat all sellers the same. Congress must not be an obstacle to the desire of … state legislatures to reduce state income taxes by using the 'new' revenue from previously uncollected sales taxes."

Currently, retailers are only required to collect sales tax in US states where they also have bricks-and-mortar stores, but the MFA would give states the option to require online retailers with national annual sales greater than USD1m to collect the tax, even if the websites lack a physical presence in the state.

A version of the MFA was approved by the Democrat-led Senate in May last year and sent for approval to the Republican-led House, where it has encountered a great deal of opposition, particularly on the grounds that it is considered to create new taxation and onerous compliance requirements.

Republican opposition to the MFA remains strong. For example, Ted Cruz (R – Texas), a member of the Senate Committee on Commerce, Science, and Transportation, recently issued a video in which he professed that, "if the internet sales tax became law, small online retailers would have to comply with over 9,600 tax jurisdictions across the country. Big box stores don't have to do that. And it's just not fair."

He said that "corporate lobbyists who want internet taxes to crush their competition see a chance to make it law during the lame-duck session of Congress. We must say no. No net tax. Not now. Not ever."

TAGS: compliance | tax | business | sales tax | tax compliance | commerce | law | internet | e-commerce | legislation | United States | retail

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