The U.S. Senate reintroduced a revised version of the Marketplace Fairness Act, also known as the e-Fairness Act, which would allow states to collect taxes on on-line purchases made by their residents.
The supporters of the bill claim that the new tax would be beneficial for brick-and-mortar businesses because it will eliminate the unfair advantage on-line get from not having to collect taxes from out-of-state customers. This situation often translates into products with notable price discounts when bought from on-line stores.
The Marketplace Fairness Act has been first proposed in 2013, but although it passed the Senate, it was finally blocked by the hot debates in the House. The new act is based on the 2014 Streamlined Sales and Use Tax Agreement.
Mike Enzi, a senior R. Senator from Wyoming and backer of the new bill, said that Marketplace Fairness Act will save the jobs in America’s towns, and prevent people working in U.S. stores from losing their jobs. Mr. Enzi also said that the new act would be fair for small businesses that struggle to compete with on-line retailers that have a clear competitive advantage since they do not have to collect some taxes.
The law’s sponsors also claim that the new act would remove any competitive discrepancies between brick-and-mortar businesses and on-line retailers. Two years ago, the bill passed the Senate with a 69 vote, so its backers currently hope that it will finally pass and allow states to enforce their own taxes without requesting permission from the federal government.
In 2013, the House declined to turn the bill into law because consumers might have perceived it as a new way of raising taxes.
“We came close in the last Congress, but the bill was never acted on in the House of Representatives. I hope that in the 114th Congress we can do what’s right for businesses in Illinois and around the country,”
said another Senator who backed the bill.
Currently, many states tax the on-line purchases of their residents but many on-line stores do not collect e-taxes from buyers outside their state. So, those buyers, in theory, must declare the taxes in their annual tax returns, but many fail to do so.
But the bill’s opponents are worried that the new law may represent an additional tax burden for regular citizens just like the Affordable Care Act had a various number of taxes some visible and others hidden. Other opponents claim that the Internet should be “a tax-free zone” as it ever was.
The e-Fairness act will allow states to force non-local online business to collect sales taxes from their residents just like Main Street businesses do.
The National Retail Federation was very pleased with the new re-introduction of the bill because far too long brick-and-mortar merchants were put under a disadvantage by their on-line peers due to the legal issue. The NRF also said that businesses should compete for customers on services, price discounts, and selection, rather than being forced to compete on whether they collect or not the sales tax.
Last week, a U.S. Supreme Court’s ruling announced the incoming revisit of a 1992 decision that had established which merchants needed to collect sales taxes from which buyers.
In 1992, the Supreme Court ruled in the Quill v. North Dakota that retailers do not have to always collect sales taxes. For instance, in that case, Quill Corp. had no physical presence in North Dakota, neither a warehouse nor a brick-and-mortar store, but the state asked the company to collect an use tax from its residents.
North Dakota customers only used a Quill’s software to check for the products in stock and place a direct order, but their state planned to impose a use tax on the retailer. However, the U.S. Supreme Court struck down that tax in 1992.
So, if the ruling gets revisited on-line retailers may face hard times regardless of the Congress’ resolution on the e-Fairness bill.
The supporters of the Marketplace Fairness Act also underlined that the current bill would not impose additional state taxes. Additionally, online stores are currently still required to collect sales taxes from some buyers who do not reside in their states. But under the Quill v. North Dakota ruling they ought to do that only if they own a physical presence, such as a store, office or warehouse, within that foreign state’s borders.
But, since 1992 many states extended their sales tax to online businesses which have at least a sales affiliate across their territory. Amazon for example collects the sales tax in two dozens states and it is currently supporting the e-Fairness bill.
Still, the new law’s detractors say that the Marketplace Fairness Act will eliminate the requirement of physical presence and will expose taxpayers to harassment from tax collectors in other states. Also, opponents claim, online retailers will be forced to find their customers’ state of residence and sift through thousands of taxing regulations to properly collect and use the sales taxes.
Image Source: Shopping Centers Today
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