Vote on US Internet sales tax bill nears: Marketplace Fairness Act

By on April 22, 2013, 12:30 PM

The U.S. Senate is poised to vote on the Marketplace Fairness Act -- an innocuously named piece of legislation which is actually an initiative to implement a nation-wide sales tax. Essentially, the MFA doesn't create a federal sales tax, but provides states with a uniform framework, better allowing states governments to enforce their own sales tax laws on transactions made across their borders.

The MFA calls upon states join the existing Streamlined Sales and Use Tax Agreement (pdf) or follow what are essentially five rules:

  1. Notify retailers in advance of any rate changes within the state
  2. Designate a single state organization to handle sales tax registrations, filings, and audits
  3. Establish a uniform sales tax base for use throughout the state
  4. Use destination sourcing to determine sales tax rates for out-of-state purchases (a purchase made by a consumer in California from a retailer in Ohio is taxed at the California rate, and the sales tax collected is remitted to California to fund projects and services there)
  5. Provide free software for managing sales tax compliance, and hold retailers harmless for any errors that result from relying on state-provided systems and data

For a long time, businesses have only been required to collect tax in states where they have a physical presence. Even then, the type of "physical presence" required for taxation has varied state by state, allowing companies like Amazon to wriggle past such laws. Slowly though, Internet companies have been required to pay sales tax in an increasing number of locations. And, interestingly enough, the MFA has Amazon's support.

Tested first by mail-order catalog services, it has long been argued that collecting sales tax on businesses operating outside of state lines would not be in line with interstate commerce laws. Additionally, it has been argued that such an endeavor would be prohibitively complex.

"The many variations in rates of tax, in allowable exemptions, and in administrative and record-keeping requirements could entangle interstate business in a virtual welter of complicated obligations to local jurisdictions"

Source: Bella Hess v. Illinois (1967) 

The MFA argues with the advent of computers and modern infrastructure, the burden of interstate businesses being required to collect sales tax for every state isn't really the burden it once was. 

However, eBay CEO John Donohoe is a staunch opponent of the bill. He argues the move will hurt small businesses. The bill's proponents though argue that isn't the case -- about 99 percent of small businesses will be exempt, they claim. Small businesses which generate less than $1,000,000 in revenue will be exempt from collecting interstate sales tax.

The Marketplace Fairness Act could go up for a vote as soon as today.




User Comments: 11

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MilwaukeeMike said:

Sheesh... if the govt devoted half as much effort to fixing our nation's financial problems as they do toward finding new ways to tax us we wouldn't have the need for all these new creative taxes.

Next will be a mileage tax. That'll be a tax on how much we drive. Since our cars are getting better gas mileage nowadays the govt is making less on gas tax and needs to find a way to make up for it.

Scrub206 said:

Sheesh... if the govt devoted half as much effort to fixing our nation's financial problems as they do toward finding new ways to tax us we wouldn't have the need for all these new creative taxes.

Next will be a mileage tax. That'll be a tax on how much we drive. Since our cars are getting better gas mileage nowadays the govt is making less on gas tax and needs to find a way to make up for it.

D: don't let them see that idea. We'll all be doomed.

cmbjive said:

Anything with the word "fair" in a bill will indeed not be fair. It's no surprise two of the biggest supporters are Wal-Mart (which already has the means to collect taxes for every jurisdiction) and Amazon (which, according to a Wall Street Journal opinion piece, will be selling software to help online retailers meet compliance).

cmbjive said:

"The bill's proponents though argue that isn't the case -- about 99 percent of small businesses will be exempt, they claim."

You know, that's the same rubric Obama used to argue for his tax increases on the wealthy, except in that case on "98%" of small businesses would not be impacted. Tell me, if 99% of small businesses are exempt from the tax, why bother with the tax?

MilwaukeeMike said:

D: don't let them see that idea. We'll all be doomed.

Ha, that's not my idea... it's been discussed already. Google 'mileage tax' and you'll see. As our govt goes further and further into debt we'll probably see all sorts of new and creative ways to be taxed.

davislane1 davislane1 said:

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1 person liked this | Saintnsinner said:

Can you say "international retailers"? Nothing like the ***** politicians killing commerce in the US. F*cktards!

Tygerstrike said:

Ok I know you love your tax free purchases online. I can respect how little anyone has to pay for something purchased online. However you need to look at the big picture. Think about how many BILLIONS in lost tax revenue your state has to put up with. Think about how much revenue that is lost to your local bussinesses due to online shopping. All the govt is trying to do is level the playing field. Now given that any product purchased online is going to be around 25% or less discounted due to practically zero overhead. Lets face it. If you ran one of these businesses you wouldnt be hireing anyone unless you had no choice. You would use the barest amount of employees you could. Therefore these online retailers are making out like a bandit and its your state and town that suffer for it. Maybe a internet tax on online purchases will be useful. The govt will finally get their fair share, and more ppl might actually make purchases in your town.

cliffordcooley cliffordcooley, TechSpot Paladin, said:

Can you say "international retailers"? Nothing like the ***** politicians killing commerce in the US. F*cktards!

Commerce is already in jeopardy and politicians haven't stepped in yet. Your comment was invalid before you made it. Equalizing taxes between on-line and off-line products are the only way forward. If the product is taxable, you are not exempt by purchasing on-line. If you can get it cheaper on-line than in a brick-and-mortar store, fine. If you travel to a store in another state you will pay their taxes, buying on-line should be no different. If you have a problem with taxes, fight the tax not how it is implemented.

davislane1 davislane1 said:

Think about how many BILLIONS in lost tax revenue your state has to put up with.

They can't lose something they never had to begin with.

This tax bill is no different from any previous or future tax code that will be put into effect: Uncle Sam wants a cut -- of everything. And it will be justified under the same fallacious argument of "lost revenue" that's been used to support every form of parasitic, money grubbing gov't scheme since 1909. The U.S. Federal Government and many state governments are p*** poor financial managers and, to compensate, have to stick their fingers into people's pockets at every opportunity to mask their perpetual and unrivaled ineptitude.

For the record, I have no problems with an online sales tax. A couple extra bucks won't hurt me (sans for the nightmare of academic texts). However, the bill should be viewed exactly for what it is: yet one more addition to one of the largest documents on the planet.

1 person liked this | cmbjive said:

Think about how many BILLIONS in lost tax revenue your state has to put up with.

Nah, I'd rather think about all of the billions states have spent on wasteful stuff and instead of cutting spending is seeking new ways to tax people.

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