Fixing Our Sales Tax System through Federal Solutions
Congress has been debating solutions for more than a decade. During that time, some states have attempted to take action on their own, leading to greater confusion and further distortion of the marketplace. However, because this is a matter of interstate commerce, Congress must ultimately grant the authority needed for states to enforce sales tax collection and remittance from out-of-state sellers. Rather than create a national mandate, federal legislation will give states the option as to whether they want to enforce their sales tax policies.
Marketplace Fairness Act
The Marketplace Fairness Act was introduced on February 14, 2013 as companion bills in both the U.S. Senate and the House of Representatives. These bipartisan measures empower states to collect taxes they are already owed on purchases their residents make through out-of-state retailers. On May 6, 2013, the Senate version of the legislation, S. 743, passed 69-27. The House version, H.R. 684, currently resides in the House Committee on the Judiciary for consideration.
The legislation does not create a new tax, rather it enables states to recover much-needed revenue that is currently due, while protecting consumer privacy. Unlike bills introduced in previous years that provided states with a single path for sales tax collection, the Marketplace Fairness Act would give states alternative ways to collect the taxes directly from the retailers. It would require states to provide a minimum level of simplification of their state and use tax codes. Some of the simplification requirements for a state include providing a single point of remittance, a more uniform sales and use tax base, and free software for remote sellers that assists in calculating and filing sales and use taxes. The bill also includes an exemption for small businesses with revenue less than $1 million in out-of-state sales per year.