Our hearts are racing (for internet sales tax collection)!

July 26, 2012

As most of our readers are no doubt aware, changes have been happening fast for online sales tax collection. Here are the basics you need to know:

  • A few days ago, the House Judiciary Committee held a hearing on the Marketplace Equity Act (H.R. 3179). Several members of Congress, both Democrat and Republican, testified at the hearing in support of the bill, and an article in the Wall Street Journal proclaimed that “the hearing revealed that a large number of lawmakers had moved beyond the question of the legitimacy of collecting online sales taxes and were focused on how to avoid making the process overly burdensome.” (We have the answer, of course: services such as TaxCloud, which take the cost and complexity out of collecting sales tax online.)
  • Meanwhile, the Senate bill on the same issue, the Marketplace Fairness Act (S.1832), will be the subject of a hearing before the Senate Committee on Commerce, Science, and Transportation next week on August 1.
  • Also, New Jersey Governor Chris Christie has joined the list of Republican lawmakers who support federal online sales tax legislation. He also made a deal with Amazon for the company to begin collecting sales tax on purchases made by New Jersey residents in July 2013, in exchange for which the company will build two new distribution centers in the state. Since Christie is one of the leaders of the Republican party—he is frequently mentioned as a potential vice-presidential candidate—we hope this will put an end to the divisive rhetoric that only Democrats support online sales tax collection.
  • Another sign of the momentum that federal legislation is gathering, news articles on online sales tax collection are proliferating everywhere. A few we recommend:

Retailers, lawmakers revive call for Internet sales tax, MSNBC/CNBC, July 26

Online sales tax effort gains traction at US House hearing, Wall Street Journal, July 24

Proposed online sales tax gaining momentum and foes, FOXBusiness, July 24

Supporters of online sales tax say it’s good for consumers, PC World, July 24

Online sales tax is coming!Wall Street Journal, July 21

Pass the online sales tax! The Washington Post Editorial Board, July 16

Tax break nears end for online shoppersWall Street Journal, July 16 NOTE: FRONT PAGE

States, Congress rallying for an e-sales taxWashington Post, July 8 NOTE: FRONT PAGE

Our opinion: If the bipartisan momentum and support for online sales tax collection continues at the current pace, this issue could provoke a seemingly extraordinary achievement: that Congress can get something done, even in an election year!

This legislation is good for consumers, state and local governments, and businesses. Opponents (primarily eBay) claim the legislation will hurt businesses, but their argument ignores the actual substance of the proposed legislation. The Marketplace Fairness Act S.1832 (and the Marketplace Equity Act H.R.3179) require that states simplify and standardize their sales tax systems and they must provide the software (or services) for retailers to easily comply. We strongly support action by Congress on this issue.

Florida business groups inspired by California-Amazon deal

September 19, 2011

According to a Sarasota Herald-Tribune (FL) article, Florida business groups are hopeful that the deal between California legislators and Amazon—which repeals California’s online sales tax collection law in exchange for the reinstatement of Amazon’s 10,000 California affiliates and requires both groups to work together for the passage of the federal Main Street Fairness Act; if the federal bill doesn’t pass by the end of July 2012, the California law will be reinstated—will “help convince [Florida] lawmakers to take similar steps”:

Mark Wilson, president of the Florida Chamber of Commerce and a member of the Florida Alliance for Main Street Fairness, saw the California deal as a positive sign for Florida retailers.

“If Amazon can collect and remit sales taxes in California, it can do it [in] Florida,” Wilson said. “Recently, both Texas and California passed E-fairness legislation to level the playing field for small businesses. Now, Amazon’s agreement to collect sales tax in California — just like Main Street retailers — proves that they don’t need a special tax deal at the expense of Florida-based small businesses either.”

Wilson said Florida lawmakers now have “a unique opportunity to put small business job-creation ahead of Amazon’s tax subsidies.”

While Wilson has a point—I don’t think anyone would argue that it’s too difficult for Amazon to collect Florida sales tax (especially with services like TaxCloud available)—Amazon has good reasons to support federal online sales tax collection legislation (the Main Street Fairness Act) and oppose state-by-state laws. While the Main Street Fairness Act would actually make it easier for businesses to collect sales tax, state-by-state laws have become so numerous and varied that they make it extremely difficult for businesses to collect sales tax in more than one state.

One way that the Main Street Fairness Act makes it easier for businesses to collect sales tax is by authorizing online sales tax collection only in those states that have simplified their sales tax laws by joining the Streamlined Sales and Use Tax Agreement (SSUTA).

Although Florida’s recent bill to join SSUTA stalled, we would urge Florida lawmakers to pass that bill, and soon. Not only will it make it easier for businesses to collect Florida sales tax, but it will also put Florida in the perfect position to require all online retailers to collect sales tax when the Main Street Fairness Act—which now has the full support of California and Amazon behind it—becomes law.

Joining SSUTA will also make it clear to Congress that Florida, like California and Amazon, supports the Main Street Fairness Act.

Many states have been tempted to skip the step of joining SSUTA and go straight to requiring some online retailers (mostly large ones, like Amazon) to collect sales tax. California started out taking that approach. But as California and other states have discovered, that approach ends up hurting businesses, which have to deal with all the complexities of state-by-state sales tax laws, and in-state affiliate marketers, which are usually dropped by retailers so that the retailer can try to avoid collecting state sales tax. The end result is fewer jobs in the state and no increase in collected sales tax.

Joining SSUTA is the better approach. It simplifies sales tax collection for businesses while leveling the playing field between online and Main Street retailers. We hope this is the approach Florida decides to take.

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.

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 PoliticoDick 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 TimesAmazon.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 JournalDurbin Moves to Tax E-Commerce
  6. Article in Crain’s Chicago BusinessDurbin proposes Internet sales tax
  7. Article in TechFlashCongress 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 HillDurbin introduces online tax bill, has Amazon support
  12. Article in Internet RetailerFederal 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 PoliticoAmazon, eBay split over online sales tax bill
  19. Article in ReutersSenator supports online sales tax reform
  20. Article in TechFlashA national e-commerce ‘Amazon tax’ law draws harsh reaction
  21. Article in UPIAmazon capitulates on state taxes
  22. Article in Gather:  Congressional Support for Uniform Online Sales Tax
  23. Article in Rave NewsCongress Looking At Balancing The Online Scales With Main Street Fairness
  24. Article in Accounting TodayCongress Introduces Bill to Collect Online Sales Taxes
  25. Article in PC MagazineDemocrats 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 DailyTechIllinois Senator’s Business Tax Bill Gains Supporters, Amazon is Onboard
  28. Article in The Orange County RegisterCongress jumps into ‘Amazon sales tax’ issue
  29. Article in JCKNational 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 MichiganLiveSales tax for online retailers? John Conyers sponsors bill to ‘level the playing field’
  32. Article in Computer WorldTech groups oppose Internet sales tax bill
  33. Article in WebProNewsMain Street Fairness Act Draws Amazon Support, eBay Opposition
  34. Article in EcommerceJunkieCongress Eyes Federal Sales Tax Bill
  35. Article in GeekOSystemAmazon 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 AssociationSen. 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 NetworkFederal Internet sales tax law back on the table
  41. Article in IDEX OnlineMain 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 FrontInternet Taxes, “Main Street Fairness” & the Origin-Based Alternative
  45. Article in OCMetroAmazon supports Main Street Fairness Act
  46. Article in TechZone360Democrats Propose Bill to Collect SalesTax from Online Retailers
  47. Article in the Rapid City JournalJohnson’s bill would tax sales by online retailers
  48. Article by ADOTASAssociations Rail Against Federal Online Sales Tax Bill
  49. Article by ZippyCartPoliticians Push for Nationwide Tax on Ecommerce Solutions
  50. Article by Washington Business JournalA national e-commerce ‘Amazon tax’ law draws harsh reaction
  51. Article by NorthJersey.comInternet sales tax legislation would impact North Jersey businesses
  52. Article by FITSnewsWeb Tax: This’ll Help (Not)
  53. Editorial in The Washington TimesUnplug the Internet tax
  54. Editorial in the Denver PostOnline tax bill isn’t so simple
  55. Article in CaliticsAmazon’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.

StorefrontBacktalk: It’s up to Congress

July 7, 2011

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.

Macy’s VP voices support for Streamlined, federal legislation

July 7, 2011
Bay Area BizTalk

Bay Area BizTalk: Amazon Tax

In a Bay Area BizTalk post on the San Francisco Business Times website, Macy’s vice president and tax counsel Frank Julian voices his support for the Streamlined Sales and Use Tax Agreement (without mentioning it by name) and federal legislation on online sales tax:

“The state-by-state approach we think is the wrong way to address this…. It doesn’t bring about the simplification and uniformity we think is critical,” said Frank Julian, vice president and tax counsel at Macy’s Inc. “We would support congressional legislation that brings about simplification, uniformity and vendor compensation in exchange for making all sellers collect tax, but it has to do all of that. It has to be a package. You can’t take one side of the equation without the other.”

Make no mistake, Macy’s and most small retailers who now count Amazon as competition want the giant online retailers to pay sales tax — it’s only fair and levels the playing field, they say. But to work and to be constitutional, it must be done through federal legislation, and it must at the same time make it easier and more economical to collect sales tax.

We couldn’t agree more. And Amazon CEO Jeff Bezos has said much the same thing.

The article also includes a good illustration of why streamlining and simplification is so desperately needed:

Consider that every city and county in California has a different tax rate. Then consider that in some states a Snickers is considered — and thus taxed as — a candy bar while a Nestle Crunch bar is not considered candy because it contains rice. Some states tax fruit juices differently based on just how much fruit is in the drink, and not all states tax clothing.

The Streamlined Sales and Use Tax Agreement (SSUTA) eliminates all that complexity and makes it much easier for retailers to collect sales tax for multiple states. Federal legislation, in the form of the Main Street Fairness Act, would provide an incentive for states to join SSUTA and ease the burden on retailers.

The rest of the article is also worth reading for its analysis of what online sales tax collection means for both big box retailers and mom-and-pop stores; we highly suggest you check it out.

We do have to disagree with one conclusion the article draws: that collecting sales tax for multiple states is too difficult for small online retailers.

Yes, we need the simplification provided by SSUTA. But for small online retailers worried about the potential costs of collecting sales tax, we have just one word: TaxCloud.

We created TaxCloud especially for those small retailers without the resources of an Amazon or Walmart who are faced with collecting sales tax and wondering how they can do it. We’ve made it easy and, perhaps even more important, we’ve made it completely free.

Once again, we have to hope that Congress hears this voice of support for Streamlined and federal legislation. The recent passage of affiliate nexus legislation in California has brought the issue to the forefront of the national conversation. It’s time for Congress to listen to that conversation and finally take action.

Tennessee Governor Bill Haslam urges Congress to pass federal legislation on online sales tax

July 6, 2011
Tennessee Gov. Bill Haslam willing to take lead on Internet sales tax

Tennessee Gov. Bill Haslam willing to take lead on Internet sales tax

Tennessee Governor Bill Haslam (R) said today that he is willing take the lead among the nation’s governors in urging Congress to pass federal legislation on online sales tax. The full details can be found in an article in the Memphis-based newspaper The Commercial Appeal.

He said Tennessee is already losing between $300 million and $500 million a year on untaxed Internet sales — a growing number since the states and Congress have been unable for more than a decade to agree on a “streamlined sales tax” process enabling online retailers to collect taxes easily for the nation’s thousands of state and local taxing jurisdictions.

“It’s not going to begin eroding the state’s tax base; it already is. Something has to happen nationally. The whole streamlined sales tax is a big deal, and I’m more than willing to play a leadership role,” Haslam said. “It has to be addressed on a national level or we’re going to keep playing these kinds of move-around games.”

We’re thrilled to see Gov. Haslam step forward and take the lead on the issue.

As our regular readers are well aware, more and more states (like California) are striking out on their own to try and solve this problem by enacting affiliate nexus legislation. There is clearly a need to recover the sales tax revenue currently going uncollected while also eliminating the blatant disparity of tax policy between local and online retailers. But these state-by-state solutions all have problems—only federal legislation can bring back uncollected sales tax revenue, level the playing field for local and online retailers, and make collecting sales tax easier for retailers.

The Streamlined Sales and Use Tax Agreement (SSUTA), which the governor refers to, simplifies and standardizes sales tax regulations to make it easier for retailers to collect sales tax for multiple states. The Main Street Fairness Act will authorize only those states (24 so far) that have adopted the simplification measures of SSUTA to require all retailers to collect their sales tax.

Governor Haslam has made it very clear that he supports federal legislation embodied by the much-anticipated Main Street Fairness Act. We have also heard similar supportive statements and outright pleas from other governors this year as well. We will start a separate post to detail the complete list—in the meantime, way to go Governor Haslam and Tennessee!