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US Bills On State Internet, Sales Taxes Sought Together

by Mike Godfrey, Tax-News.com, Washington

18 September 2015


The National Conference of State Legislatures (NCSL) wrote to Republican and Democrat leaders in the US Congress on September 16, urging them to delay legislation to extend, or make permanent, the Internet Tax Freedom Act (ITFA).

The NCSL expressed the belief that any consideration and passage of ITFA should be delayed to coincide with consideration of legislation, such as the Remote Transactions Parity Act (RTPA) or the Marketplace Fairness Act (MFA), that would allow states to require internet sellers to collect sales taxes on remote transactions.

"When Congress enacted the initial ITFA in 1998, it did so without the knowledge that the then fledgling communications network, which served primarily as an educational resource, would eventually change so many aspects of daily life," the NCSL noted. "It has also, unfortunately, engendered an environment that rewards business models predicated on the avoidance of state laws and regulations."

"Congressional action is needed to address the price advantage afforded to online retailers over their main street counterparts, who in addition to following their state's registration and other business requirements, dutifully collect and remit sales taxes," it added. "Conversely, many online sellers enjoy a price advantage for not having to collect applicable sales tax."

The NCSL concluded that, "if extended or made permanent, ITFA would exacerbate the federal government's infringement of state budget sovereignty and would annually cost states hundreds of millions of dollars. And if Congress continues to favor remote sellers over main street businesses in their communities, states will soon have no choice but to shift from systems that tax consumption to ones that primarily tax income and property."

ITFA placed a moratorium on the ability of state and local governments to impose new taxes on internet access, or to impose multiple or discriminatory taxes on e-commerce. It has been extended multiple times and is currently scheduled to expire on October 1, 2015.

Presently, retailers are only required to collect sales tax in US states where they also have brick-and-mortar stores. Approved by the then Democrat-led Senate in May 2013, the MFA would have given states the option to require online retailers with national annual sales greater than USD1m to collect the tax, even if their websites lacked a physical nexus in the state.

The MFA has encountered a great deal opposition in the Republican-led House of Representatives, particularly on the grounds that it is considered to create new taxation and onerous compliance requirements. The RPTA, introduced earlier this year, includes several modifications over the MFA, particularly to protect small businesses, but it has also, so far, made little progress in the House.

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

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