Senate Tries to Push Through the Marketplace Fairness Act Again
The “Marketplace Fairness Act,” commonly referred to as MFA, was once again introduced in the U.S. Senate this week by democratic Senator Dick Durbin of Illinois and Michael Enzi of Wyoming, a republican, who are co-sponsoring the latest incarnation of the internet sales-tax bill. The current bill is close in detail to the one passed in May 2013. However, the republican-controlled house did not bring the legislation up for a vote.
What Significance Does The Marketplace Fairness Act Hold?
Following this Act, sellers would have to secure and pay sales tax to the customer's home state. At the moment, a buyer can only be charged sales tax if the seller owns a physical office or store in their state. Should this act be agreed upon, it would rely greatly on the "Streamlined Sales and Use Tax Agreement" through the 50 states.
The Senate’s Stance
The principal aim of the MFA was to permit states to gather sales tax for all online consumer transactions. Additional sponsors included democrat Heidi Heitkamp of North Dakota and republican Lamar Alexander of Tennessee. Together with them were Republicans Roy Blunt and Bob Corker representing Tennessee.
Our House of Representatives
In the Legislature, the Peoples' Representatives scrutinized the Marketplace Fairness Act with some lack of confidence. The result? Given that it would probably be viewed as a tax ploy by voters, the Speaker of the House refused to bring up the measure. Many, like Durbin, contend that the bill would level the playing field for local business that lose sales to internet retailers because the customers is not forced to pay sales tax on online purchases, when the purchase is made outside of their home state. Durbin has stated in several forums that he believes Congress will see the clear benefit of the MFA for businesses.
At the moment, the sentiment of the House is not certain. House Judiciary Chairman Bob Goodlatte, a republican from Virginia, has been drafting alternative legislation which would relegate the sales-tax reporting requirement to the state where the seller is located, instead of the buyer.
Outside Influences
TechAmerica, the public-policy department of CompTIA that advocates before law-makers at the federal and state levels opposes the bill. Their discomfort stems from the overwhelming compliance burden forced on force on online businesses – not to mention the costs involved in policing it.
Several legislators and lobbyists fear that this would stop internet sellers from doing business in States where it’s a cost burden to comply with the tax-collection burden. Legislators who are stuck on the fence believe that the real debate must be about if a balance can be found for both the States who wish to obtain the tax revenue, and the online companies who will need to cover the added costs.
The fact is, most websites don’t try to collect sales taxes from out-of-state consumers, even though many states require them to. Consequently, the business owner leaves the reporting and payment of the sales tax to the customer. (And we both know this rarely ever happens.)
Strong support for the bill comes from the National Retail Federation. They welcome the attempt to give offline businesses the same opportunities as their online competitors. The core argument here is that the consumer should be able to choose where to buy items based on the total price, instead of if the seller charges sales taxes.
David French, NRF senior vice president for government relations said that brick-and-mortar business have faced a distinct competitive disadvantage based solely on the inaction of congress to solve the internet sales-tax inequality. However, many see the MFA as just one more ploy to raise taxes. Many online businesses are able to offer lower prices because they do not have the same overhead as a brick-and-motor store has, so the addition of sales taxes will not do much to help prices become more competitive.
Judicial Rulings
This is all the result of a 1992 Supreme Court decision that established what are known as “nexus rules” for determining what merchants have to collect sales taxes and from which buyers. However, a more recent Supreme Court decision could make way for the Justices to revisit the Nexus Decision and the “Physical Presence Test” if the Congress doesn’t take action.
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