StorefrontBacktalk: It’s up to Congress

A new article in StorefrontBacktalk gives a very thorough and balanced background on online sales tax collection, framed by a discussion of California’s new affiliate nexus legislation.

The article ends by saying that it’s up to Congress to settle the issue, not states:

Ultimately, it will be up to Congress to decide how it wants state sales taxes to be collected on out-of-state sales. In fact, in the Quill decision two decades ago, the Supreme Court invited Congress to step in, and assumed that it would. . . .

Whether states can use affiliate marketing as a “hook” to force the payment of sales tax is only a short-term issue. We will wait for Congress to act. Or not.

We absolutely agree: We need federal legislation, not state-by-state laws, to determine how retailers collect sales tax. And in fact, we expect Congress to act soon—the Main Street Fairness Act is likely to be introduced this summer.

The benefits of federal legislation like the Main Street Fairness Act are many, but in particular, it’s a better solution than the affiliate nexus laws so many states are enacting because it wouldn’t hurt the small businesses that rely on affiliate income. (When California passed its affiliate nexus legislation, Amazon immediately canceled their 25,000 affiliate relationships in the state—which means 25,000 affiliates suddenly lost their income.) In fact, the Main Street Fairness Act would actually provide an incentive for states to make it easier for small businesses to collect sales tax for multiple states.

The Main Street Fairness Act would allow only those states that have adopted the simplification measures of the Streamlined Sales and Use Tax Agreement (SSUTA) to require all retailers to collect sales tax. SSUTA simplifies and standardizes sales tax regulations to make it easy for retailers to collect sales tax for multiple states—which means that the Main Street Fairness Act gives states an incentive to make multistate sales tax collection easy for retailers.

The Main Street Fairness Act is the right solution for everyone involved:

  • states, which need to recover the billions of dollars in sales tax currently going uncollected
  • retailers, which need their sales tax collection obligations to be standardized and predictable, without damaging small businesses
  • consumers, who should no longer be expected to keep track of and report the sales tax due on every internet purchase (you have been doing that, right?)

We look forward to congressional action soon to introduce and pass the Main Street Fairness Act.

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