‘Marketplace Fairness' Online Tax Waits for Congress

by Luke Jones  on Monday, Oct. 21, 2013 12:00 am  

From left, Robert Coon, Randy Zook and Chris McMillen

After years of court battles and failed bills, Congress is the only hope left for a measure intended to level the tax playing field between physical businesses and their online-only competitors.

The legislation in question is Senate Bill 743, the Marketplace Fairness Act.

In essence, it would give states authority to require online-only businesses with Web sales of $1 million or greater to collect sales tax from customers.

Some background: Back when the Internet was a tadpole, the U.S. government permitted online businesses to sell their goods without collecting a sales tax. The idea was that this would help fledgling digital businesses get off the ground amidst their more established physical brethren.

Technically, in Arkansas, buyers are supposed to pay that sales tax at the time of the purchase. But without a prompt from the retailer it rarely happens.

Almost two decades later, brick-and-mortar shops up to and including behemoths like Wal-Mart Stores Inc. of Bentonville are protesting that digital businesses now have an unfair advantage.

Although Amazon.com’s profits have been up and down, with its sales increasing from $48 billion to $61 billion between 2011 and 2012, it’s not hard to see brick-and-mortar’s problem.

Some measures have been taken to try to level the field. For example, a 1992 Supreme Court ruling, originally used for mail-order companies, said that states must require collection of sales tax if businesses had a physical presence in the state.

When states made a push to collect from online-only businesses with warehouses or in-state “advertising associates,” this prompted larger businesses — most notably Amazon — to desert those warehouses and fire associates, including some in Arkansas.

Other attempts to introduce legislation at the federal level have failed. A bill introduced in 2011 by Sen. Dick Durbin, D-Ill., for example, died because it didn’t give options to individual states.

But the Marketplace Fairness Act still has a chance — it passed the Senate in May and now must clear the House. It doesn’t rely on physical presence, so online entities couldn’t dodge the issue as they have in the past.

The bill has had bipartisan support. In Arkansas, both Republican Sen. John Boozman, and Democrat Sen. Mark Pryor are co-sponsors. Republican 2nd District Rep. Tim Griffin has shown support, and Rep. Steve Womack, the Republican congressman from the 3rd District, was the original sponsor.

 

 

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