A long-anticipated plan to streamline state and local tax collection on e-commerce sales was introduced into the House and Senate late last month.
However, passage of the Democrat-backed legislation remains uncertain within a bitterly divided Congress.
Dubbed the Main Street Fairness Act, the bill is cosponsored by Senators Dick Durbin (D-Ill.), Tim Johnson (D-S.D.) and Jack Reed (D-R.I.), and Representatives John Conyers (D-Mich.), Peter Welch (D-Vt.) and Heath Shuler (D-N.C.).
“This bill will level the playing field for local businesses by ensuring that online retailers collect the same sales taxes that brick-andmortar retailers already do,” said Conyers. “This will help our state and local governments avoid devastating layoffs and cuts to essential services vital to the well-being of our local communities.”
Added Welch, “When a consumer can walk into a store, try out a product and then go home and buy it online without paying sales tax, Main Street businesses and downtowns lose.”
As do state coffers. According to Durbin, states are expected to lose as much as $24 billion in uncollected state and local taxes on Internet and catalog sales next year, while his home state of Illinois has lost an estimated $153 million annually from 2005 to 2010.
Specifically, the bill would certify the Streamlined Sales and Use Tax Agreement, a comprehensive interstate system to harmonize and simplify sales tax rules and administrative requirements that has been adopted by 24 states, but requires congressional approval under the Supreme Court’s 1992 “Quill” decision.
The legislation also provides a lengthy list of simplification requirements to ease administrative burdens for sellers, exempts small businesses, and compensates retailers for startup administrative costs associated with collecting sales taxes.
The bill is publicly supported by a raft of retail lobbying groups, including the National Retail Federation (NRF) and the Retail Industry Leaders Association (RILA), as well as individual retailers, including Sears and, of all companies,
The king of e-commerce has long argued that it already pays taxes in about half of the markets where it does business, and welcomes a federal solution that streamlines tax rules and administrative requirements across all jurisdictions.
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,” Amazon global public policy VP Paul Misener said in a letter to Dick Durbin last month. “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-ofstate sellers.”
Sears, which for the time being is based in Durbin’s home state of Illinois, said the legislation “will restore balance and fairness to the system by enabling states to enforce the collection of taxes that are already owed by every customer making a purchase, whether the purchase is online or in a retail store. This is a critical step in addressing an issue that has resulted in over a decade of unfair competition between retailers who collect the sales tax and those who refuse to do so … With this legislation, states will be allowed to require online-only sellers to collect the tax at the point of sale just as they do with retailers who have a physical presence in the state.”
In April, Best Buy CEO Brian Dunn predicted that ecommerce taxation will become a national issue once Durbin’s bill is introduced. “It’s just a matter of time before the playing field is leveled,” he said during a company analysts’ conference (see TWICE, April 18).
Wal-Mart Stores, which along with Sears and Best Buy is a founding member of the Alliance For Main Street Fairness, a big-box coalition, is a proponent of state-level efairness legislation, and offered a more tacit endorsement of the bill. In a recorded earnings call last week, president/ CEO Mike Duke said, “We’re encouraged by the growing interest in a federal response to this issue … and we will remain engaged in the debate in Washington.”
Outright opponents of the bill, which include the Electronics Retailing Association (ERA) and eBay, argue that despite the promised exemption, small businesses will assume an unfair burden in implementing the tax plan compared to national chains.