Online Sales Tax: Senate Nears Vote On Marketplace Fairness Act

The online sales tax loophole that helped build the e-commerce industry but has long been despised by brick-and-mortar retailers and state governments could become a thing of the past.

With broad bipartisan support and a nod from the White House, the Marketplace Fairness Act is on its way to a vote in the Senate, but it’s not clear if it’ll have nearly as much luck in the House, where opposition is building. More details:

What’s happening: On a 74-20 procedural vote Monday, the Senate opened up debate on amendments to the Marketplace Fairness Act, which could lead to a vote on the bill later this week, according to The Hill  (opens in a new tab). The bill would force retailers outside of a state’s boundaries to charge sales tax but includes an exemption for retailers that earn less than $1 million annually. (Currently, consumers are supposed to report such spending when filing their income taxes, but few do.) Some legislators opposed to the measure have asked Senate Majority Leader Harry Reid (D-NV) to put the legislation  through a Finance Committee review process before the chamber votes on it. The committee is led by Sen. Max Baucus (D-MT), who opposes the bill.

Groups in favor: Retail groups and state legislators, who have actively pushed for the bill’s passage, cheered Monday’s vote. The bill has fairly broad but not universal support from associations, including the National Governors Association  (opens in a new tab) and the National Retail Federation  (opens in a new tab). In a statement, the Consumer Electronics Association  (opens in a new tab) urged “swift action and final passage of this common-sense legislation” that helps brick-and-mortar retailers.

Groups opposed: Meanwhile, the Electronic Retailing Association argued that the Senate needs  (opens in a new tab) to “consider the consequences of acting in haste on a new tax-collection regime without giving a full vetting to the views of all concerned.” Other groups opposed include TechNet  (opens in a new tab), the Direct Marketing Association  (opens in a new tab), and the Computer and Communications Industry Association  (opens in a new tab). Financial organizations, including the Securities Industry and Financial Markets Association and the Financial Services Roundtable, opposed the bill for reasons unrelated to online sales taxes; they suggest that the measure could lead to taxes on financial transactions at the state level. One notable opponent in the corporate sector is eBay, which sent an email to its users  (opens in a new tab) urging them to contact their lawmakers to oppose the measure.

Next steps: While the bill stands a good chance to pass the Senate, the House may be a different story: Several conservative groups, including FreedomWorks and Americans for Prosperity, plan to beef up opposition to the bill in the House. “If imposed on retailers, marketplace fairness legislation could burden retailers with the task of being compliant with up to 9,600 different taxing jurisdictions,” wrote FreedomWorks blogger Ryan Riebe  (opens in a new tab). “While traditional retailers claim this requirement creates more fairness in the marketplace, the reality is that the requirement does the opposite, imposing an unfair burden on smaller online retailers who would have a more difficult time complying with different sales tax rates from around the United States.”

If the bill makes it through the House, the president is likely to sign it. The White House gave the bill a show of support earlier this week.

“We have heard overwhelmingly from governors, mayors, and the business community on the need for federal legislation to level the playing field for our businesses and address sales tax fairness,” said White House spokesman Jay Carney.

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