Multi-State – U.S. Senate Approves Remote Seller Collections

SALT Report 2299 – As part of its fiscal year 2014 Budget Resolution, the U.S. Senate approved, by a vote of 75 – 24, an amendment that would allow states to collect taxes on remote sales. If passed, the bipartisan federal Marketplace Fairness Act of 2013 would create an internet sales tax and authorize individual states to collect those taxes on online purchases, regardless of which state the retailer is located.

Under current federal law, individual states have the power to collect sales taxes on online purchases made within their states if the online retailer has a physical presence in the state, such as a retail store or distribution center. However, the Supreme Court’s 1992 decision in Quill v. North Dakota, left state and local governments in a position in which they were unable to enforce their existing sales tax laws on sales made by out-of-state retailers.

The Marketplace Fairness Act would overturn the Quill decision and make it easier for states to acquire these taxes, as online retailers would be forced to collect and pay the sales taxes directly to the states. Therefore, this vote is seen as a victory for those who want to see this sales tax loophole closed.

However, opponents of the amendment say that there is nothing fair about the Marketplace Fairness Act, as neither the amendment that was passed nor the Act itself is about ‘leveling the playing field.’ If it were, the legislation would require brick-and-mortar retailers to ask their customers where they live and remit taxes to each of their home states.

Although the vote was only a test and will not become law since the Budget Resolution is non-binding, it is a good indicator that the Senate has more than enough votes to pass the actual legislation later this year. If they do so, the Marketplace Fairness Act is estimated to bring in $23 billion in additional sales tax revenues annually.

For Further Information

Market Place Fairness Act – Senate Bill 336