SALT Report 2442 – Early this evening, the U.S. Senate will vote on the Marketplace Fairness Act, the Bill that would require online retailers to collect sales tax in every state that they ship goods into. Currently, the legislation appears to have enough support to pass, however it faces strong opposition from conservative business groups, anti-tax activists, retailer groups, and from Senators in tax free states such as Alaska, Delaware, Montana, New Hampshire, and Oregon.
Although residents of the tax free states would not be charged sales tax on purchased items shipped to their homes, the businesses that are based in these states would be required to collect sales tax on items they ship into states that do impose sales tax. This leads to the daunting task of deciphering the sales tax laws of the 9,600 taxing jurisdictions in the 45 states that impose sales tax.
Andrew Moylan with the R Street Institute in Washington, D.C., says that this Bill creates an unfair burden as it will require “businesses to quiz purchasers about their location, look up the appropriate rules and regulations in each taxing jurisdiction across the country, and then collect and remit sales tax for that distant authority. No brick-and-mortar shop has to do this for in-store sales, and yet every online retailer would have to do it for remote sales.”
Additionally, the fear is that business will be subject to an increased audit risk as well as an increase in the costs associated with complying with the new laws. Both of which will likely result in lost jobs and revenue, as compliance and audit defense costs would be extraordinarily burdensome and expensive, especially for a smaller business.
After what is expected to be an easy Senate approval today, the Marketplace Fairness Act would still have to be voted on by the House of Representatives, where it is likely to face further debate and scrutiny. If passed by the House and the measure becomes law, the collection requirement s would begin as soon as each state is able to simplify their tax laws and create a single entity for collecting sales tax.
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