THUD (Part 2) California legislature repeals ABX1 28 – All to work to pass the Main Street Fairness Act by July 2012!

September 10, 2011

California legislature approves amended AB 155, repeals ABX1 28! AMZN to reinstate CA affiliates!

[UPDATED 9/10 @ 6:30 AM PDT] We were very excited to learn that in the final hour of their 2011 legislative session, the California legislature overwhelmingly passed a heavily amended version of AB I55  (California Senate voted 39 to 1 in favor, the Assembly voted 59 to 8 in favor).

Although the text of the amended bill is not yet now available for public inspection (text of substantive amendment included below), it has been reported on by several authorative sources, including California Senate Republican Leader Bob Dutton (R-Rancho Cucamonga), California BOE Member George Runner, the Associated Press, and the San Francisco Chronicle.

Here’s what we have learned so far:

  1. AB 155 (as amended) repeals ABX1 28 (see our original post “THUD! Did Congress Hear That?“)
  2. Amazon will reinstate its 10,000+ California affiliates

    “This bipartisan, win-win legislation will allow Amazon to bring thousands of jobs and hundreds of millions of investment dollars to California, and welcome back to work tens of thousands of California-based advertising affiliates,” Paul Misener, Amazon’s vice president of global public policy, said in a statement.

  3. All parties (including California legislators, local and national retailers, and Amazon) will work with Congress to pass federal legislation (the Main Street Fairness Act) by July 2012!
  4. If Congress fails to act by July 2012, the original terms of ABX1 28 will be reinstated.

As we have stated several times before, we firmly believe this is the best course of action:

As states such as California and Illinois enact affiliate nexus legislation (so-called Amazon tax laws) to attempt to collect sales tax due on online purchases, small businesses across the country are being caught in the crossfire. Affiliate marketers are forced to either find entirely new sources of revenue or flee to another state. Meanwhile, online retailers that rely on affiliate marketing are forced to either eliminate their established sales and marketing teams or come into compliance with the new laws.

The better solution is the anticipated Main Street Fairness Act, which incorporates the Streamlined Sales and Use Tax Agreement (SSUTA). SSUTA streamlines and simplifies state sales tax regulations, making it easy for retailers to collect sales tax for multiple states. SSUTA is the cooperative effort of 44 states (including California and Illinois), businesses, political leaders, and industry associations. States that adopt SSUTA have committed to make sales tax collection easier for all retailers, online and offline, large and small.

Although AB 155 has passed the legislature, Governor Brown has until October 7th to sign it into law; if he doesn’t—well, then all bets are off. Timing-wise, one would expect (or at least hope) the governor will make a decision in advance of the end-of-September deadline for Amazon to submit its half-a-million signatures in support of its referendum for voter repeal ABX1 28.

We are truly inspired by this dramatic twist of events in the legislature of the eighth-largest economy in the world. We look forward to the promised bipartisan effort in Washington, DC, to enact the Main Street Fairness Act by July of next year!

We would also like to send our most sincere (and hopefully not premature) congratulations to all of our affiliate friends and supporters in the state of California!

[UPDATED 9/10 @ 6:30 AM PDT]  The new Section 6 represents the substantive amendment to AB155:

SEC. 6.

  1. (a) Sections 1 and 2 of this act shall become operative on the effective date of this act.
  2. (b) Section 3 of this act shall become operative on either of the following dates:
    1. If federal law is enacted on or before July 31, 2012, authorizing the states to require a seller to collect taxes on sales of goods to in-state purchasers without regard to the location of the seller, and the state does not, on or before September 14, 2012, elect to implement that law, Section 3 of this act shall become operative on January 1, 2013, and Section 2 of this act shall become inoperative on that same date.
    2. If federal law is not enacted on or before July 31, 2012, authorizing the states to require a seller to collect taxes on sales of goods to in-state purchasers without regard to the location of the seller, Section 3 of this act shall become operative on September 15, 2012, and Section 2 of this act shall become inoperative on that same date.
  3. (c) The Director of Finance shall, on or before August 15, 2012, certify in writing to the Governor, the Senate Committee on Rules, the Speaker of the Assembly, and the State Board of Equalization whether or not federal law has been enacted on or before July 31, 2012, authorizing the states to require a seller to collect taxes on sales of goods or services to in-state purchasers without regard to the location of the seller.
  4. (d) For the period between June 28, 2011, and the effective date of this act, state law regarding the imposition and collection of use taxes, including, but not limited to, any reporting requirement imposed on a seller, shall be administered and applied in accordance with state law as it read on June 27, 2011.

SEC. 4. SEC. 7. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are:

In order to lessen the burden at the earliest possible time on small businesses that are otherwise required to collect use tax, it is necessary that this act take effect immediately.

In order to clarify and confirm at the earliest possible time the obligations of certain retailers to collect use taxes from California purchasers, it is necessary that this act take effect immediately.

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Amazon and retailers agree with California to push for federal legislation resolution (Main Street Fairness Act)

September 8, 2011

As reported moments ago by the Sacramento Bee (read here), Amazon and other national retailers have agreed to suspend their referendum effort in exchange for a concerted effort to resolve this issue (of internet sales tax collection) by July 2012.

We recommend reading the article directly, as the SacBee has this issue well covered.

9/9/2011 UPDATE – California legislature approves amended AB 155, repeals ABX1 28! AMZN to reinstate CA affiliates! All to work to pass the Main Street Fairness Act!

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California’s latest twist in sales tax battle will hurt local retailers in favor of a certain online auction site

August 27, 2011
Los Angeles Times

Los Angeles Times: New online sales tax legislation

According to a Los Angeles Times article, the next move in the battle over California’s online sales tax collection law comes from supporters:

A coalition of giant, brick-and-mortar retailers and their legislative allies have come up with a new strategy to try to head off Amazon.com’s referendum to overturn the state’s new Internet sales tax law.

On Thursday, lawmakers amended a bill in the Senate Appropriations Committee and sent it to the full Senate for a vote next week. If the bill gains approval from the Senate, the state Assembly and the governor, its passage would have the effect of nullifying Amazon’s current drive to qualify a referendum for the June 2012 budget.

To recap the situation thus far: A law requiring online retailers with California affiliates to collect sales tax went into effect on July 1. Amazon immediately dropped its affiliates in California, and on July 8 the company filed a petition to put a referendum to repeal the law on the ballot, for California voters to decide on. The petition was approved, and since then Amazon has been campaigning to collect the 505,000 signatures needed to put the referendum on the ballot.

And  now it seems that supporters of California’s legislation have made the latest move. According to the LA Times, “Passage of a new law would supersede the old law, making the referendum invalid.”

Apparently the new bill raises the small seller exception—where the previous law exempted online retailers with less than $500,000 in annual remote sales from collecting sales tax, the new one raises that threshold to $1 million. That change was enough to get a certain online auction company to drop its opposition to the law, so legislators are more optimistic about its chances.

Believe it our not, this latest escalation of the small seller exception is as dramatic as it is surprising. The economic impact of this change will be significant, however the lawmakers in Sacramento seem to have glossed over that fact:

…add an urgency clause, and increase the small business exemption from $500,000 to $1 million. Staff notes that BOE does not track micro-level data on affiliates that may be subject to the exemption, so the fiscal impact related to increasing the threshold in indeterminable. (emphasis added)

Are they serious? They think it’s indeterminable? Affiliates have nothing to do with the revenue collection, it’s the retailers that collect, not the affiliates. This statement is pure misdirection. I expect Ms. Betty Yee and quite a few analysts at the Board of Equalization would dispute that they could not calculate the loss of revenue, and the legislature should immediately review some of their recent findings on the subject (like this and this).

This amendment blatantly discriminates against small local main street retailers who are not afforded any such exception—proper tax policy should treat all retailers and taxpayers equally. Surely there are a few local retailers who would love to not have to collect the sales tax on their first $1 million in sales. For a bit of perspective on this matter, let’s listen to Amazon’s own Mr. Paul Misener in his testimony before the United States House of Representatives in 2006

To be sure, no one expects truly small businesses to do the work of sales tax collection alone but that doesn’t mean they shouldn’t be required to do it at all. By analogy we require small business persons to sign their legal documents in ink but we don’t expect them to make their own ballpoint pens.

Amazon.com will offer sales tax collection services to our small seller customers. I am sure that our on-line competitors also can and will. Of course, this discussion so far as been limited to small businesses conducting interstate sales. What about small main street businesses selling locally? Even after a decade of e-commerce, as Brian [Bieron of eBay] has pointed out, still over 90 percent of retail sales are off line.

Small main street businesses already collect sales tax and, thus, have both the administrative burden of tax collection and the higher prices caused by it. If out of state small businesses would not have to collect, then their main street brethren would be saddled with a competitive disadvantage both as to burden and price. Hopefully policy makers never would conclude that this disparity would be fair to main street small businesses. (emphasis added)

We couldn’t agree more.

We continue to believe that all this contentiousness is unnecessary. Energy would be better spent on federal legislation on online sales tax collection—which Amazon and lawmakers support. It solves many other problems, too. To quote from ourselves:

As states such as California and Illinois enact affiliate nexus legislation (so-called Amazon tax laws) to attempt to collect sales tax due on online purchases, small businesses across the country are being caught in the crossfire. Affiliate marketers are forced to either find entirely new sources of revenue or flee to another state. Meanwhile, online retailers that rely on affiliate marketing are forced to either eliminate their established sales and marketing teams or come into compliance with the new laws.

The better solution is the anticipated Main Street Fairness Act, which incorporates the Streamlined Sales and Use Tax Agreement (SSUTA). SSUTA streamlines and simplifies state sales tax regulations, making it easy for retailers to collect sales tax for multiple states. SSUTA is the cooperative effort of 44 states (including California and Illinois), businesses, political leaders, and industry associations. States that adopt SSUTA have committed to make sales tax collection easier for all retailers, online and offline, large and small.

We hope that the Main Street Fairness Act will soon make these state battles moot. It’s the best solution for all.

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Main Street Fairness Act could mean elimination of inheritance tax, says IN lawmaker

August 24, 2011

Indiana State Senator Luke Kenley, chairman of Indiana’s Senate Committee on Appropriations and president of the Streamlined Sales Tax Governing Board, last week issued a statement urging Indiana’s congressional delegation to support the Main Street Fairness Act, which was introduced on July 29 by Senator Dick Durbin. He suggested that should the bill pass, Indiana could eliminate the state’s inheritance tax:

Kenley (R-Noblesville) also said he hopes state lawmakers would agree to use the nearly $200 million in additional revenue the state would receive from the passage of the federal legislation to eliminate Indiana’s inheritance tax and reduces others . . . .

“Hoosier bricks-and-mortar businesses are at competitive disadvantages with online retailers who often do not collect sales taxes on Internet purchases, costing our state as much as $200 million annually,” Kenley said. “Though consumers are required to report and pay a ‘use tax’ on Internet purchases when they file their taxes each year, many unknowingly fail to do so, costing Indiana and other states substantial revenue—an estimated $11.4 billion nationwide each year.”

Kenley isn’t the first to suggest that improving the collection of sales tax could allow states to cut other taxes. As we blogged about a few months ago, West Virginia delegate John Doyle has said that if online retailers regularly collected West Virginia sales tax, the state might be able to end its tax on groceries.

Kenley also pointed out that the Main Street Fairness Act will benefit Indiana retailers as well as the state’s schools and other essential services:

A 1992 U.S. Supreme Court ruling, known as the Quill decision, determined retailers are not required to collect sales taxes in states where they do not have physical locations unless mandated by Congress. As a result, many consumers visit a store to compare or test products, but then make their purchases online—often avoiding payment of sales taxes, Kenley said.

If enacted, the Main Street Fairness Act would create a uniform sales-tax collection system ensuring all businesses—both online and brick-and-mortar retailers—collect uniform sales tax for purchases. The act would also relieve consumers of the legal burden to report to state tax departments the required sales tax they owe for online purchases.

“I am asking our congressional delegation to support a modern, streamlined, pro-business initiative that will help our thousands of retailers who are being discriminated against under the current policy,” Kenley said. “This is not a new tax but one that is already owed and not being collected. With sales tax serving as Indiana’s largest source of revenue, our K-12 schools, higher education institutions, public safety and other essential state services are hit the hardest by the current system. It’s time we level the playing field for our local businesses and remove this unfair burden from Hoosier consumers.”

We applaud Senator Kenley for making his support for the Main Street Fairness Act known to his state’s DC representatives. The legislation is hugely important for states, since it gives them the ability to determine for themselves how (and whether) online sales tax should be collected for the state. But since it’s federal legislation that will be enacted (or not) by Congress, state lawmakers need to make sure their representatives in DC know just how important the bill is for them.

We hope other state lawmakers will follow Senator Kenley’s lead and contact their state’s representatives in Congress to let them know that they support the Main Street Fairness Act.

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MA Committee on Revenue endorses bill to join Streamlined

August 19, 2011

According to a State House News Service article in the Boston Herald, Massachusett’s Committee on Revenue last week endorsed a state bill that would allow Massachusetts join the Streamlined Sales and Use Tax Agreement (SSUTA).

Although the article refers to the bill as H 3672, our research shows that H 3672 is a bill on accessible housing for people with disabilities. It’s our guess that this is simply a typo in the article and that the actual bill the Committee on Revenue approved is H 3673, a revision of H 1695 that the committee “reported favorably” on August 15 and that aims to “promote sales tax fairness for Main Street retailers.” H 3673 would “authorize the commissioner to petition the Streamlined Sales Tax Governing Board to allow the commonwealth to become an associate or full member of the Streamlined Sales Tax Governing Board.”

We strongly support the commonwealth’s efforts to simplify and standardize their sales and use tax laws by joining SSUTA—we even went up to Boston in April to testify in support of the bill. Our testimony read, in part:

This bill is very important to alleviate the imbalance being felt by local retailers across the state, as increasingly they are seeing consumers browse their stores and ask clerks questions, only to go home and buy from online retailers to save on sales tax. Over time, the vanishing sales tax revenue has hurt not only the state, which is losing the sales tax proceeds, and local retailers, who are losing business, but even Massachusetts residents themselves, as the loss of sales tax revenue has resulted in dramatic cuts to local services, including police protection, fire protection, and schools.

In addition, by adopting this legislation Massachusetts would send a clear message to Washington, D.C., that it is time for federal action to correct the growing inequity between local retailers that have to collect sales tax and online retailers that do not. It’s time to shift the burden of calculating, reporting, and remitting tax on online purchases from individual consumers to online retailers. It’s time for local communities to start receiving the sales tax revenue they are due, so they can stop cutting services because of lack of funds. It’s time to recognize that collecting sales tax on online purchases is fair, easy, and the right thing to do. It’s time to pass the Main Street Fairness Act.

True, joining SSUTA is just a first step toward resolving the unfair practice of requiring local small businesses to collect sales tax while not requiring the same of larger, and frequently more technologically sophisticated, out-of-state retailers. It’s only a first step, but it’s a crucial step. Momentum on this issue is building, and Massachusetts now has the opportunity to stand united with twenty-four other states and say that the problem of uncollected sales tax, which affects nearly every state in the nation, needs a national solution, and that national solution has been provided by SSUTA.

If Massachusetts does become the latest state to join the Streamlined Sales and Use Tax Agreement, it would simplify Massachusetts’ sales tax regulations, making it easier for businesses (particularly those outside Massachusetts) to collect Massachusetts sales tax.

We applaud the Committee on Revenue for approving this sensible legislation, and we hope to see Joint Committee on Rules show the same wisdom. We look forward to the Bay State  becoming the 25th member of the Streamlined Sales and Use Tax Agreement.

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E-commerce sales growing every quarter, at highest level in Q2 2011

August 19, 2011

According to an Internet Retailer article on newly released U.S. Commerce Department figures for the second quarter, e-commerce sales are up 17.5% from a year ago and are at the highest level ever—4.6% of all retail sales:

U.S. e-commerce sales totaled $47.51 billion during the second quarter, up 17.5% from $40.42 billion a year ago, according to seasonally adjusted estimates released today by the U.S. Commerce Department.

E-commerce accounted for approximately 4.6% of total retail sales during the second quarter, its highest level on record, the Commerce Department says. Total adjusted retail sales during the second quarter reached $1.04 trillion, according to today’s report. E-commerce accounted for 4.5% of total retail sales during the first quarter of 2011, and 4.2% of total retail sales during the second quarter of 2010, the Commerce Department says.

Interestingly, Internet Retailer found a discrepancy in the Commerce Department report:

When excluding sales in categories not commonly bought online—automobiles, fuel, grocery and restaurant meals—Internet Retailer calculates that e-commerce accounted for 8.4% of total retail sales during the quarter, up from 7.3% a year ago. This calculation is based on Q2 retail sales totals the Commerce Department released last week; that report put total adjusted retail sales for Q2 at $1.16 trillion, higher than the retail total released today.  The Commerce Department did not immediately respond to a request for explanation about the difference.

A comparison between the change in online sales and change in bricks-and-mortar sales is particularly stark at Saks:

“We are approaching the fall season a bit more cautiously and will continue to be very strategic with our expense, capital and inventory spending,” says Stephen Sadove, CEO of Saks Inc., where online sales were up 50% during the second quarter from a year ago, and bricks-and-mortar comparable store sales were up 15.5%. (emphasis added)

Those are incredible figures: Q2 online sales at Saks were up 50% from a year ago, while bricks-and-mortar store sales were up only 15.5%.

Those statistics make it easy to understand why so many Main Street retailers are concerned about online sales. While Saks has an online store, the local bike store probably doesn’t, and it’s likely to lose many of its sales to online retailers.

Online retailers should be required to play by the same rules as Main Street retailers. When exempting online retailers from collecting sales tax gives them a perceived 10% price advantage, how can any Main Street retailer compete?

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FedTax Rebuts NetChoice and TechAmerica Misinformation Campaign on Main Street Fairness Act

August 18, 2011
FOR IMMEDIATE RELEASE

FedTax Rebuts NetChoice and TechAmerica Misinformation Campaign on Main Street Fairness Act

New Legislation Will Make Sales Tax Collection Simpler

Seattle, Washington – August 18, 2011 – FedTax has issued a rebuttal to the misinformation and scare tactics being used by NetChoice and TechAmerica in an effort to derail the Main Street Fairness Act, which was introduced on July 29 in the Senate by Senator Dick Durbin (D-IL) and in the House of Representatives by Representative John Conyers (D-MI).

Misinformation
A statement issued on July 29 by NetChoice’s Steve DelBianco inaccurately claims that the cost of collecting sales tax will hurt online retailers and that the Main Street Fairness Act “fails to define safe harbors for small businesses.”

“Both of these claims are simply false,” said Joan Wagnon, FedTax Executive Vice President and former Secretary of Revenue for the state of Kansas. “Free software is available to help retailers comply with the Main Street Fairness Act. And Mr. DelBianco’s statements about nonexistent safe harbors for small business are rubbish.” The Main Street Fairness Act, she explains, incorporates the Streamlined Sales and Use Tax Agreement (SSUTA), which exempts small businesses from collecting sales tax. “Section 609 of SSUTA explicitly defines a small seller exception-any retailer with less than $500,000 a year in remote sales is not obligated to collect sales tax. Furthermore, Section 610 creates a plan to compensate small sellers for any expenses incurred in conforming to SSUTA. Any retailer with less than $5 million a year in remote sales can receive up to $12,240 in reimbursements within the first six months of collection. The states developed the small seller exception and the reimbursement plan specifically to accommodate to the concerns raised by businesses during the public meetings and hearings organized by the SSUTA Governing Board, which Mr. DelBianco attended.”

Scare Tactics
An August 16 letter from TechAmerica incorrectly says that the Main Street Fairness Act “would cede Congressional [sic] power over interstate commerce to the SSUTA Governing Board, a body created by a few states.”

In fact, the Streamlined Sales Tax Project was created by the National Conference of State Legislatures (NCSL), the National Governors Association (NGA), forty-four states, and more than eighty-five businesses. The Governing Board, which is composed entirely of state-appointed representatives, was formed in 2005.

Ms. Wagnon, herself a former president of the Governing Board, explained, “Under the Main Street Fairness Act and SSUTA, states retain complete control of their sales tax systems. All of the states that have voluntarily adopted SSUTA’s guidelines to simplify their sales tax laws have done so with absolute transparency and accountability. And every SSUTA state sends both elected officials and revenue department officials to the Governing Board to express the will and intent of that state’s voters. So in fact, the Main Street Fairness Act protects states’ rights and sovereignty by ensuring they determine their own sales tax rules. The states choose whether or not to adopt SSUTA guidelines, and their representatives make up SSUTA’s governing body.”

TechAmerica insists that keeping track of the nation’s sales tax rates would adversely affect online retailers. But according to David Campbell, FedTax CEO and cofounder, “It’s absurd to say that collecting sales tax would hurt e-commerce companies. The real-time shipping tasks these companies already can do are far more complex than collecting sales tax. For instance, online retailers regularly calculate shipping fees based upon the size and weight of items being purchased, the destination of the purchase, and the desired delivery speed. Calculating, collecting, and remitting sales tax is much easier-especially with services like TaxCloud available at no cost to retailers.”

Simplification Achieved
According to Scott Peterson, executive director of the Streamlined Sales Tax Governing Board, SSUTA’s guidelines are beneficial for businesses. “SSUTA’s provisions have been developed by states and businesses over the past decade to simplify sales tax collection,” he said. “Instead of keeping track of a multitude of state sales tax regulations, for SSUTA member states, retailers only need to follow the guidelines in SSUTA-which means, among other benefits, they’ll only have to use one tax return form for every SSUTA state. And if a business uses a sales tax management service offered by a SSUTA Certified Service Provider, they know the service has been tested and verified by every SSUTA member state.”

Sten Wilson, owner of Point of View Farm, a heritage sheep farm in upstate New York, says that the Main Street Fairness Act will make it easier for businesses to comply with sales tax laws. Wilson and his wife “frequently visit festivals and fairs in other states to sell … livestock, wool, and yarn,” he states. “Upon returning home from each trip, I [used to be] faced with the complex and exhausting task of … filling out all the sales tax return forms.” The Main Street Fairness Act, Wilson says, would change that by providing an incentive for states to simplify and standardize their sales tax laws by adopting SSUTA’s guidelines.

“The combination of . . . technology [like TaxCloud] and SSUTA’s simplification measures ultimately unravels a huge web of entangling forms and paperwork, freeing businesses like mine from bureaucracy, promoting efficiency, and increasing productivity and, most importantly, profitability,” says Wilson. “They make dealing with sales tax much, much easier for small business owners.”

About FedTax
FedTax makes it easy for businesses to calculate, collect, and remit sales tax with its free TaxCloud sales tax management service. It was founded by e-commerce veterans who have extensive experience in large-scale internet services and have been directly involved in building some of the most recognizable brands on the internet, including Google, American Express, Microsoft, and Expedia.

FedTax has been designated a Certified Service Provider by the Streamlined Sales Tax Governing Board. The company’s free TaxCloud service is relied upon by nearly 900 businesses to calculate and remit sales tax across the country. TaxCloud can be easily integrated into most accounting, order management, and e-commerce shopping cart systems.

FedTax is headquartered in Seattle and has offices in Connecticut and Kansas.

FedTax Contact:
Daniela Saunders
SVP Marketing
dsaunders (at ) fedtax.net
+1 203-803-2048

View a PDF of this Press Release

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More business groups supporting the Main Street Fairness Act

August 17, 2011
WFCA

WFCA supports Main Street Fairness

The American Booksellers Association (ABA) and the World Floor Covering Association (WFCA) have joined other business groups in publicly stating their support for the Main Street Fairness Act.

According to an article on the industry website Floor Covering News, the WCFA endorsed the Main Street Fairness Act after a unanimous vote of its executive committee:

“This legislation is long overdue and aptly named,” said Jim Walters, Chairman of the Board, WFCA and president of Macco’s Floor Covering, Green Bay, WI. “In some states Internet sellers enjoy as much as a 10% price advantage over local brick and mortar retailers who are mandated by law to collect and remit sales tax to local and state governments. This legislation would make the playing field a little more level,” he concluded.

The WFCA views the legislation as helping small business interests. “This bill is crafted in such a way that it is not anti-Internet based companies, but does seek to address the fundamental unfairness in the marketplace as Internet commerce takes an ever increasing slice of the retail pie,” said Chris Davis, president & CEO, WFCA. “This is not a Republican or Democrat issue. It impacts all Americans. And it’s not a new tax. It’s one every purchaser is supposed to pay, but isn’t. The WFCA is joining coalitions to support this legislation and we are going to encourage everyone we can to back these bills and write their representatives in Washington to urge them to support their passage.” (emphasis added)

ABA e-fairness campaign

ABA e-fairness campaign

The American Booksellers Association has long been a strong supporter of online sales tax collection. According to an article in Bookselling This Week on the ABA website, Oren Teicher, the ABA CEO, wrote to Senators Susan Collins and Olympia Snowe of Maine to ask them to support the Main Street Fairness Act:

In the letters to Collins and Snowe, Teicher wrote: “This bill if passed would go a long way toward leveling the playing field for bricks-and-mortar stores in those states. More importantly, since customers already owe use tax for any online purchases they make, this is not a new tax — it simply stipulates who is required to collect and remit the sales tax.

“Currently, our independent bookstore members, and Main Street retailers like them, are being forced to compete with remote, online retailers that have a significant, and unfair, advantage. . . .

Teicher also noted: “Importantly, sales tax fairness is an issue that is supported by Republicans and Democrats at both the state and federal level. Sen. Durbin’s bill is virtually identical to the bill introduced by [Republican] Senator Enzi last year, and, ultimately we expect full bipartisan support for the Main Street Fairness Act. We urge you to please support Sen. Durbin’s bill.” (emphasis added)

The ABA website provides an “e-fairness action kit” with templates for letters to lawmakers. Although it’s designed for independent booksellers, the kit is a great resource for anyone who wishes to contact their state or federal representatives.

We’re happy to see these groups join others in supporting the Main Street Fairness Act. It’s important to remember that for every Walmart or Best Buy that supports the bill, there are dozens of small businesses—such as an independent bookstore or rug seller—that also support it. They may be less visible, but there are many more small businesses than large ones that need this legislation in order to compete on a level playing field with online retailers.

If you agree and want to support small, independent businesses in your community, write to your representatives and let them know that you are in favor of the Main Street Fairness Act.

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Sen. Boozman (R-AR) voices support for the Main Street Fairness Act

August 16, 2011
Senator Boozman (R-AR)

Talk Politics Segment: Senator Boozman supports online sales tax collection

Senator John Boozman (R-AR) gave an interview with Roby Brock on Talk Politics on Monday and said that he believed online retailers should collect sales tax, just as bricks-and-mortar retailers do. For Senator Boozman, it seems to be an issue of fairness and states’ rights:

[Where I live] sales tax is about 9 percent . . . and so when [bricks-and-mortar retailers] start out 9 percent behind [because they have to collect sales tax and online retailers don't], then you’ve got problems. . . .

When you look at the trajectory, online sales are heading just upwards as quickly as they can do. If you’d asked me this question ten years ago I’d [have said] no, leave the internet alone, let them establish themselves. Right now they’re very much established, and so I don’t think it’s fair. . . .

I think it’s a states’ rights issue. I think the states ought to be able to allow [online sales tax collection], and I think . . . we need to make it such that the states can . . . enforce it, and then go from there. But I do think right now it’s not a level playing field, and you look at rural America, it’s very very difficult right now with the economy that we’ve got, but when you have this tremendous inequity it makes it that much harder.

We couldn’t agree more. States should be able to determine for themselves whether and how sales tax should be collected on online purchases, just like any other kind of purchase, and online and bricks-and-mortar retailers should all play by the same rules.

However, we are puzzled but encouraged by one statement Senator Boozman made: that he didn’t really like the Durbin bill (the Main Street Fairness Act) but would be working with Senator Durbin. We hope this signals a renewed sense of compromise to achieve a common good.

You can see the interview for yourself here; the comments on online sales tax collection begin at 19:12 and last just under two minutes. A summary of the interview is available here.

Bravo, Senator Boozman! Thank you for having the courage to speak out on this important issue and for committing to help protect states rights and local businesses.

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Group calls for boycott of Amazon, but Main Street Fairness Act is real fix

August 15, 2011

In an announcement earlier today, California “State Senator Loni Hancock (D-Oakland), Assembly Majority Leader Charles Calderon (D-Montebello), and Assembly member Nancy Skinner (D-Berkeley) joined dozens of California seniors, low-income families, people with disabilities, and health care and human services advocates” to launch the ThinkBeforeYouClickCA.org website opposing Amazon’s ballot referendum against California’s online sales tax collection legislation. The website urges people to cancel their Amazon accounts in protest of Amazon’s actions:

Every Californian has been affected by the cuts to balance California’s budget, none more than low-income seniors, students and people with disabilities. Now, online retail giant Amazon.com wants to overturn the one small victory we won this year in our campaign to close corporate tax loopholes: the Sales Tax law that would require online vendors to collect sales tax just as California’s “bricks and mortar” vendors do. This law will provide California with $200 million in desperately needed revenues to prevent further cuts to vital public services, while helping local business by closing the loophole that lets online retailers like Amazon.com undercut them. 

Fight back by telling Amazon.com to play by the same rules all other California businesses do! If Amazon.com is unwilling to contribute to the well-being of our state, then we need to tell Amazon.com that we won’t contribute to their profits!

According to a related Associated Press article, Amazon has spent $3 million to support its ballot referendum against California’s legislation.

While we understand why groups oppose the ballot referendum, there is a much better solution for everyone. The Main Street Fairness Act, now pending before Congress (S.1452 / H.R. 2701), would authorize states to require all retailers to collect sales tax—which would both level the playing field for bricks-and-mortar retailers and ensure that states receive the sales tax revenue that is already due and is needed to fund vital community services. What’s more, it will make collecting sales tax easier for all businesses.

Best of all, this is something that Amazon and California legislators can agree on—both support the Main Street Fairness Act. Whether you support or oppose California’s sales tax legislation, the Main Street Fairness Act makes more sense. It makes everyone play by the same rules, prevents further budget cuts, makes sale tax collection easier for businesses, and helps keep people employed (both by letting retailers keep their affiliates and by helping local retailers stay in business).

California’s Board of Equalization estimates that the state lost $1.145 billion in 2010 because most online retailers didn’t collect sales tax. As the Supreme Court ruled in 1967 (Bellas Hess) and 1992 (Quill), the only road toward recovering that lost revenue goes through Washington, D.C., via the Main Street Fairness Act—as we have said before.

Amazon has publicly stated that it supports the Main Street Fairness Act. Amazon’s Vice President for Global Public Policy, Paul Misener, even sent a letter thanking Senator Dick Durbin for introducing the bill:

Amazon.com has long supported a simple, nationwide system of state and local sales tax collection, evenhandedly applied to all sellers, no matter their business model, location, or level of remote sales.  To this end, I am writing to thank you for your bill that would allow states that sufficiently simplify their rules to require collection of sales tax by out-of-state sellers.

If you’re thinking about boycotting Amazon, consider putting your energy into supporting the Main Street Fairness Act instead. Contact your representative in Congress and let them know that the Main Street Fairness Act is the best solution for everyone. (Plus, it lets you keep your Amazon account.)

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Posted by FedTax

NRF urges congressional “supercommittee”: Main Street Fairness Act is key

August 11, 2011
NRF

NRF: Main Street Fairness Act is key

In a press release issued today, the National Retail Federation urged the congressional “supercommittee” on deficit reduction to focus on the economy and job creation, and it named the Main Street Fairness Act as one of three key initiatives Congress should enact:

The panel is an important opportunity to look at a range of policies and reset our national priorities so that we can put our nation’s economy back on track and put Americans back to work. For the nation’s retailers, this means a tax system that treats all players fairly instead of being riddled with special breaks, and it means looking at rules and regulations that kill jobs. . . .

The Main Street Fairness Act . . . would make it easier for states to require out-of-state Internet retailers to collect sales tax on sales to their residents. The legislation would end an unfair tax advantage held by online retailers over Main Street stores, which are struggling to keep their doors open and to continue providing employment in local communities across the country.

The other initiatives the NRF recommended: corporate tax reform and “relief from the employer mandate provision of the 2010 health care reform law.”

We’re glad to see the NRF point out how much the Main Street Fairness Act can contribute to the economy and job creation. By leveling the playing field between online and local retailers, the MSFA helps keep local stores open and employing local residents. It also means that states will receive the sales tax revenue that has been steadily disappearing as shoppers have moved online over the past decade—revenue that pays for schools, police, parks, and libraries.

In all the talk lately about the debt ceiling, deficit reduction, and the economy, we’ve been a bit concerned that the Main Street Fairness Act could get overlooked. It’s worth remembering that this bill, without raising taxes or creating a new tax, helps everyone:

  • Large and small retailers alike, both local and online, would find it easier to collect and remit sales tax;
  • State and local governments would benefit from much-needed revenue that funds vital services
      • States would no longer need to resort to controversial presumed nexus laws
      • States that have already implemented presumed nexus could repeal them
  • Affiliate marketers would no longer be threatened by state-by-state legislation
      • Retailers that rely upon affiliate marketing would be able to continue (or resume) doing so;
  • Consumers would no longer be subject to use tax self-reporting and payment obligations.

For anyone concerned that compliance with MSFA would be difficult or costly, we remind them that TaxCloud is absolutely free, and handles all aspects of compliance including calculation, collection, reporting, returns, and remittance—and even will respond to jurisdictional audits.

We agree with the NRF (and many other organizations) that the MSFA should be one of Congress’s top priorities.

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Posted by FedTax

Press on the Main Street Fairness Act

July 31, 2011

The moment people heard about the introduction of the Main Street Fairness Act, everyone started buzzing (in chronological order – we will endeavor to keep this list updated – Updated: 8/4/2011 @ 08:48 EDT):

  1. Article in Politico: Dick Durbin to introduce online sales tax bill
  2. Press release by FedTax (supporting): Small Businesses Applaud Senator Durbin and Representative Conyers for Introducing Main Street Fairness Act
  3. Article in the Los Angeles Times: Amazon.com sales-tax issue taken up by Congress
  4. Press release by the National Retail Federation  (supporting): NRF Says Internet Sales Tax Bill Will Help Preserve Main Street Jobs
  5. Article in the National Journal: Durbin Moves to Tax E-Commerce
  6. Article in Crain’s Chicago Business: Durbin proposes Internet sales tax
  7. Article in TechFlash: Congress to take up Internet sales tax issue plaguing Amazon
  8. Press release by the National Taxpayers Union  (opposing): Beware of Fiscal Potholes in Congress’s Latest “Main Street Fairness Act,” Taxpayer Group Warns
  9. Statement by Americans for Tax Reform (opposing): Internet Tax Introduced by Democrats Durbin, Conyers
  10. Press release by NetChoice (opposing): NetChoice Strongly Opposes ‘Main Street Fairness’ Act From Congressional Democrats
  11. Article in The Hill: Durbin introduces online tax bill, has Amazon support
  12. Article in Internet Retailer: Federal sales tax bill introduced
  13. Press release by the Retail Industry Leaders Association (supporting): Main Street Fairness Act Introduction the First Step Toward Fair Competition
  14. Press release by Sears (supporting): Sears Holdings Applauds Senator Durbin’s Introduction of the Main Street Fairness Act
  15. Press release by Sen. Durbin: Durbin, Conyers, Welch and Others Introduce Bill to Level the Playing Field for Main Street Retailers
  16. Letter from Amazon (supporting): July 29, 2011 Letter from Amazon to Senator Durbin in Support of Main Street Fairness Act
  17. Press release by the National Conference of State Legislatures (supporting): NCSL Announces Support for Main Street Fairness Act
  18. Article in Politico: Amazon, eBay split over online sales tax bill
  19. Article in Reuters: Senator supports online sales tax reform
  20. Article in TechFlash: A national e-commerce ‘Amazon tax’ law draws harsh reaction
  21. Article in UPI: Amazon capitulates on state taxes
  22. Article in Gather:  Congressional Support for Uniform Online Sales Tax
  23. Article in Rave News: Congress Looking At Balancing The Online Scales With Main Street Fairness
  24. Article in Accounting Today: Congress Introduces Bill to Collect Online Sales Taxes
  25. Article in PC Magazine: Democrats Introduce Federal Bill to Collect Online Sales Tax
  26. Press release by the International Council of Shopping Centers (supporting): Shopping Center Industry Supports Efforts to Level the Field between Internet and Brick-and-Mortar Retailers
  27. Article in DailyTech: Illinois Senator’s Business Tax Bill Gains Supporters, Amazon is Onboard
  28. Article in The Orange County Register: Congress jumps into ‘Amazon sales tax’ issue
  29. Article in JCK: National Internet Sales Tax Bill Introduced in Congress
  30. Statement by FreedomWorks: (opposing): In the Shadow of the Senate: A New Tax Emerges
  31. Article in MichiganLive: Sales tax for online retailers? John Conyers sponsors bill to ‘level the playing field’
  32. Article in Computer World: Tech groups oppose Internet sales tax bill
  33. Article in WebProNews: Main Street Fairness Act Draws Amazon Support, eBay Opposition
  34. Article in EcommerceJunkie: Congress Eyes Federal Sales Tax Bill
  35. Article in GeekOSystem: Amazon Supports Internet Sales Tax Law
  36. Press release by Jewelers of America (supportive): JA Applauds Introduction of ‘Main Street Fairness Act
  37. Press release by the ITIF (supportive): Statement on New Internet Sales Tax Legislation S. 1452
  38. Article by the Performance Marketing Association: Sen. Durbin Proposes Federal Sales Tax Solution
  39. Press release by the Electronic Retailers Association (opposing): New Efforts To Tax and Regulate Electronic Retailers A Bad Idea
  40. Article in the National Jewelers Network: Federal Internet sales tax law back on the table
  41. Article in IDEX Online: Main Street Fairness Act Introduced, JA ‘Applauds’
  42. Article by CompTIA (The IT Industry Association): Main Street Fairness Act Introduced: Requires Interstate Sales Tax Collection
  43. Press Release by the Information Technology and Innovation Foundation (supportive): Statement on New Internet Sales Tax Legislation S. 1452
  44. Article in the Technology Liberation Front: Internet Taxes, “Main Street Fairness” & the Origin-Based Alternative
  45. Article in OCMetro: Amazon supports Main Street Fairness Act
  46. Article in TechZone360: Democrats Propose Bill to Collect SalesTax from Online Retailers
  47. Article in the Rapid City Journal: Johnson’s bill would tax sales by online retailers
  48. Article by ADOTAS: Associations Rail Against Federal Online Sales Tax Bill
  49. Article by ZippyCart: Politicians Push for Nationwide Tax on Ecommerce Solutions
  50. Article by Washington Business Journal: A national e-commerce ‘Amazon tax’ law draws harsh reaction
  51. Article by NorthJersey.com: Internet sales tax legislation would impact North Jersey businesses
  52. Article by FITSnews: Web Tax: This’ll Help (Not)
  53. Editorial in The Washington Times: Unplug the Internet tax
  54. Editorial in the Denver Post: Online tax bill isn’t so simple
  55. Article in Calitics: Amazon’s Long War on Sales Taxes
  56. Press release from the National League of Cities (supportive): Main Street Fairness Act Introduced in Congress
We noticed that the press releases opposing the legislation have, thus far, either relied on vague language without really engaging with the bill (the National Taxpayers Union) or repeated one of the common mischaracterizations of the bill that we recently blogged about (Americans for Tax Reform, NetChoice). Once again: The bill does not create a new tax or raise taxes, and technology and the simplified sales tax laws the bill requires together make it easy for businesses to collect sales tax for multiple states.

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Posted by FedTax

S.1452 (the Main Street Fairness Act) Introduced in the US Senate

July 30, 2011

UPDATED: 8/1 @ 21:00 – The GPO just released the PDF : 112th Congress – S.1452 (the Main Street Fairness Act)

Yesterday, Senator Richard Durbin, the Senate Majority Whip, introduced Senate Bill 1452 before Congress.

NOTE: July 29, 2011, Letter from Amazon to Senator Durbin in Support of Main Street Fairness Act

This is what the Honorable Senator Durbin had to say upon introduction:

   ”Level the Playing Field.”

When I ask small business owners what they would like the federal government to do to help them thrive, the answer I most frequently hear is, “level the playing field.”

It may be a cliché, but there’s truth to it. Most small businesspeople don’t want a government handout. They don’t want special treatment. They just want to be able to compete fairly against other businesses.

That is why I am introducing the Main Street Fairness Act.

If you are a small business owner in Peoria or Springfield or Alton, you compete against neighboring businesses down the street and, increasingly, with sellers on the internet. The businesses down the street have to collect the same state sales taxes that you do. But many internet sellers don’t.

That means internet sellers have a built-in price advantage. That isn’t fair, and it’s not a level playing field.

The Main Street Fairness Act would address that. The bill would give congressional endorsement to the Streamlined Sales and Use Tax Agreement, which 45 states and the District of Columbia created years ago to help make it feasible for businesses selling online to collect state and local sales taxes already owed.

Why is this agreement necessary? The Supreme Court ruled in the early ’90s that the maze of current sales tax rules and rates was too complex to expect online retailers to comply. The states worked together to address that problem.

The Main Street Fairness Act says that any state that wants to do so can require online retailers to collect the same sales taxes that Main Street businesses collect, provided that small online retailers are exempt, online retailers are compensated for any start-up administrative costs associated with collecting sales taxes, and all retailers are treated equally regarding sales tax collection.

Let me be as clear as I can on one point: this bill is NOT a tax increase.

It doesn’t amend the Internal Revenue Code in any way. It simply provides states the option to require all retailers to collect the sales taxes that are already owed.

The Main Street Fairness Act provides two other big benefits.

First, consumers will no longer be asked to itemize the sales taxes they owe from their online purchases on their year-end tax forms. Few consumers comply with the law today—most don’t know they should—but the Main Street Fairness Act would eliminate the need to do so.

Second, state and local governments would collect taxes that are already owed.

It is no secret that many states and cities, including the State of Illinois and local governments across my state, are struggling to balance their budgets.

The State of Illinois estimates that we lose as much as $153 million each year in unpaid taxes on internet sales alone.

Passing the Main Street Fairness Act would help state and local governments balance their budgets without cutting spending or raising new taxes.

The Main Street Fairness Act is supported by the National Governors’ Association, National Conference on State Legislatures, Governing Board of the Streamlined Sales and Use Tax Agreement, National Retail Federation, International Council of Shopping Centers, Retail Industry Leaders Association, and the National Association of Real Estate Investment Trusts.

The Main Street Fairness Act will level the playing field for our small businesses. I urge its passage.

Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

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Posted by FedTax

Simon Property Group urges Congress to introduce and pass the Main Street Fairness Act

July 27, 2011

Earlier today David Simon, chairman and CEO of the Simon Property Group (NYSE: SPG), the largest real estate company in the country, had some nice things to say about the much-anticipated Main Street Fairness Act during the company’s Q2 earnings call:

Let me just mention in Main Street Fairness Act, you’ve seen some editorials. In fact, in the Journal today, there is an article in the Journal. You saw the Indianapolis Star wrote an editorial on it. And let me just say that we’ve been very vocal about the unfair advantage that Internet retailers have and not being required to collect sales tax. We are urging Congress to introduce and pass the Main Street Fairness Act, which will allow states to end the subsidy being provided to retailers such as Amazon.com. Let me be clear, this is not a new tax, but would merely require Internet retailers to collect sales tax on behalf of the states where they do business, something that brick-and-mortar retailers and even those who sell on the Internet have done for years. And this is required by law. The economy is helped by having a level playing field, allowing an open market to determine consumer behavior without government subsidies, which we believe, is occurring for the online retailers.

We couldn’t agree more.

Why aren’t more CEOs (particularly of bricks-and-mortar retailers) stepping out of the shadows on this issue and demonstrating the courage and leadership Mr. Simon showed today?

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Posted by FedTax

Bloomberg View editorial endorses taxation without representation

July 26, 2011

An article editorial from the National Review published late last night (7/25/2011) by Bloomberg View offers a frightening proposal . . .

Although the article starts out with a somewhat disrespectful tone regarding the Alliance for Main Street Fairness (which seems frankly uncalled for and doesn’t seem to enhance the article at all), it admits that the lack of sales tax collection on online purchases “is indeed unfair both to the mom-and-pop retailers . . . and to the larger companies.“

The author should have mentioned that it is also unfair to local communities—communities that rely on sales tax revenue to fund vital local services that voters/consumers/taxpayers approve, either directly, through ballot initiatives, or indirectly, through their elected local governments. The National Conference of State Legislatures calculates that non-collection of sales tax on internet and mail-order purchases will cost over $23 billion during FY2012.

Strangely, as the solution to this enormous national problem, the author proposes a national origin-based sales tax system:

A far better solution would be for states to levy sales taxes based on where products are coming from rather than on where they’re going.

To understand the problem with this idea, one must first remember: Sales tax is local.

Our country was founded on the most basic concept of taxation with representation. That is why each state has its own House of Representatives and Senate—to ensure that there is local representation and a local voice regarding why, how much, and for what purpose you and your community will be taxed.

To adopt the origin-sourcing concept at a national scale would mean that if you bought something from an online store that charged you sales tax based upon where that online retailer is located, then you would be paying a sales tax you did not vote on.

Consider if you lived in California and bought a $1,100 LED TV from an online consumer electronics store based in New York City. Under the author’s plan, the NYC retailer would add 8.875% to the price of your TV ($97.63) and remit those proceeds to the retailer’s jurisdiction—New York City—not your California jurisdiction.

Under such a plan, you would be forced to pay a tax without any representation.

Origin sourcing gets even more toxic at a national scale. Consider how many e-commerce retailers in California or New York (or any of the 45 states with sales tax) would immediately relocate all operations to a state with no sales tax just to stay competitive—if you think your property and income taxes are high now, imagine what would happen if 40% of these states’ annual budgets vanished overnight.

The author bases his proposal on a PricewaterhouseCoopers study published in 2006, which was researched in 2004 and is based on costs incurred by retailers in 2003. To be blunt, this research is hopelessly out-of-date. Fortunately for all of us, technology and the internet have come along way since 2003! For example, in 2003 Facebook and YouTube did not exist and Google was still a private company. Also, since 2003, the Streamlined Sales and Use Tax Agreement has achieved significant simplifications in state-by-state sales tax laws, and today 24 states  (more than half of the 45 states with sales tax) have voluntarily adopted its simplification measures.

The article says the anticipated Main Street Fairness Act “imposes costs on the economy out of proportion with any revenue it might generate.”

I am sure the author and his readers will be happy to learn that this concern is moot. Our company launched TaxCloud over a year ago, and it calculates, collects, remits, and even responds to audits for retailers—all at no cost. Using TaxCloud, any retailer (large or small, online or offline) can collect accurate local sales tax for any address in the US in 13 milliseconds, with no cost burden and minimal technical burden.

Once again, sales tax is local—when online retailers refuse to collect, it only hurts your community.

Finally, the article is also surprising given that we briefed their editorial staff about this matter (in February), and Bloomberg has published three very supportive articles over the same number of months:

  1. Bloomberg.com supports online sales tax collection - 7/15/2011—just 11 days ago
  2. Bloomberg Businessweek article reaches surprising conclusion - 6/6/2011
  3. Businessweek editorial: “To help Main Street, close the internet sales tax loophole” - 5/2/2011
Apparently we need to request another briefing.
UPDATE: The author is not a Bloomberg editor but rather a senior editor at National Review.

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Posted by FedTax

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