The Marketplace Fairness Act (S.1832) is introduced in the U.S. Senate

U.S. Senate

S. 1832, the Marketplace Fairness Act, introduced in U.S. Senate

The Marketplace Fairness Act was introduced today in the Senate by five Republicans and five Democrats. You can find the full text of the bill and more on our new informational site, MarketplaceFairness.org. We’ve also issued a press release expressing our support for the bill, which would authorize states to require online retailers to collect sales tax.

This is the third bill on online sales tax to be introduced this year, after the Main Street Fairness Act and the Marketplace Equity Act. The primary difference seems to be that, while the Marketplace Fairness Act, like the others, requires states to simplify their sales tax laws before they can compel out-of-state retailers to collect sales tax, the bill offers states two methods of simplification: states can join the Streamlined Sales and Use Tax Agreement or they can adopt a set of simplification guidelines in the bill.

We fully support the Marketplace Fairness Act, and we look forward to its quick passage into law.

4 Responses to The Marketplace Fairness Act (S.1832) is introduced in the U.S. Senate

  1. Grant says:

    The Market Place Fairness Act is another “one size fits all” piece if phoney legislation to raise revenue and grow government. Everyone doesn’t shop in the retail stores and then buy online. My wife and I never have. Many things we buy online are not even available in nearby stores – yet, if the law passes, we will be paying more tax. That’s really all it’s about isn’t it — more taxes?

    • FedTax says:

      Actually, the Marketplace Fairness Act isn’t about raising taxes at all. Rather it is about states rights. Your state already has sales tax laws in place, and when a retailer fails to collect, your are held to your honor to voluntarily report and remit that tax due (called a “Use Tax”). So, technically… no, you won’t be paying more taxes, unless you are relying upon tax evasion to justify your theory.

  2. Justin says:

    My issues with this bill are:
    1. The burden this places on small remote sellers who do not have a physical presence in the state in which a buyer is located. This bill (along with HR 3179) would require sellers to find the correct tax rate to apply to a sale, based on the location of the buyer, remit those taxes to the proper taxing authority in each state where a sale is made, and file a return with the proper authority in each state where a sale was made. If a remote seller made sales in 50 states, then they would have to repeat this process 50 times, with possibly 50 different forms, filing and remittance procedures, and 50 different bureaucracies to deal with to resolve problems. Nationwide retailers have the back-end financial systems and accounting departments to work these sorts of issues out for the locations where they have a physical presence. Many small online sellers do not. Modifying their systems to accomplish this would be administratively complex, and outsourcing payment processing/tax collection to an outside party would eat into many remote sellers’ already thin profit margins.

    2. While both the Senate and House bills include exemption levels, the bill as written is very vague regarding how sellers or state taxing authorities determine if a seller is exempt, and what obligations those sellers might still have to prove their exempt status (filing notice of exemption, etc).

    3. The exemption levels are far lower ($500,000 for S 1832, $1,000,000 for HR 3179) that other commonly-accepted thresholds for small businesses.

    4. All of the bills I’ve read fail to recognize that higher-volume sellers benefit from economies of scale for things like shipping of purchases and potentially preferential tax rates. Higher-volume sellers can negotiate better rates than smaller sellers. This puts smaller sellers at a competitive disadvantage.

    • FedTax says:

      Thanks for your thoughtful comment. We would like to take this opportunity to address your concerns in order:

      1. Regarding your first concern about complexity and burden, we would like to direct you to our TaxCloud service. We designed TaxCloud from the ground up to resolve exactly your concerns – please take a look and let us know if you have any questions.

      2. Your concern that the proposed legislation is vague as to how sellers or state taxing authorities will determine if a seller is excepted from collection obligations, I think the Marketplace Fairness Act is clearer than the Marketplace Equity Act. It says in Section 3 C:

      SMALL SELLER EXCEPTION. A State shall be authorized to require a remote seller, or a single or consolidated provider acting on behalf of a remote seller, to collect sales or use tax under this Act if the remote seller has gross annual receipts in total remote sales in the United States in the preceding calendar year exceeding $500,000. For purposes of determining whether the threshold in this subsection is met, the sales of all persons related within the meaning of subsections (b) and (c) of section 267 or section 707(b)(1) of the Internal Revenue Code of 1986 shall be aggregated.(emphasis added)

      3. Your third concern is a bit harder to respond to. Exactly what “other commonly-accepted thresholds for small businesses” are you referring to. Beyond de minimis or occasional sales rules in effect in most states, all businesses are required to comply with state and local laws. If your reference is to the Small Business Administration’s definitions/thresholds it is important to remember that those size thresholds define “the largest that a concern can be and still qualify as a small business for Federal Government Programs” – quite a different purpose than setting a de minimis threshold for collection remittance obligations.

      4. Finally, onto your last point. It is true, none of the bills refer to your suggestion that “higher-volume sellers benefit from economies of scale for…preferential tax rates” because there is no such advantage. While your example regarding shipping costs may be valid, state and local sales tax rates are not negotiated with high-volume sellers.

      Thank you again for your comments – I hope our responses are helpful.

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