May 8, 2013

Sales tax fairness legislation passed in Senate


Over the past few years, bookstores nationwide have protested the price advantage conferred on Amazon by not having to collect sales tax. Currently, because of a 1992 Supreme Court ruling, states are only able to collect the tax if the company has a physical presence within their state.

This may be about to change. After the Marketplace Fairness Act passed in the Senate earlier this week, online retailers were one step closer to having to collect the tax, leveling the playing field between those who sell exclusively online and those with in-state bricks and mortar stores.

If the Act passes Congress — not a sure thing, at present — states will be able to levy the tax on online stores that sell more than $1 million in a year. Writes Katy Bachman in Ad Week,

“An Internet sales tax has been kicking around for a few years, but now that online shopping has grown into a $226 billion a year business, lawmakers finally took the plunge. The bill drew bipartisan support in the Senate and among traditional retail businesses looking to level the playing field with the growing online marketplace.”

President Obama has indicated that he would sign the Wal-Mart-supported bill if it passed Congress. A statement from the White House read,

“Although States presently have the authority to tax the sale of goods or services sold from out-ofstate vendors, they are prevented under current law from requiring the collection of such dulyenacted taxes. As a consequence, while local small business retailers follow the law and collect sales taxes from customers who make purchases in their stores, many big business online and catalog retailers do not collect the same taxes. Because these out-of-state companies are able to play by a different set of rules, this disparity undermines the ability of cities and States to invest in K-12 education, police and fire protection, access to affordable health care, and funding for roads and bridges. This bill would eliminate the unfair advantage currently enjoyed by big outof-state online companies over local neighborhood-based small businesses.”

The likelihood of it passing, however, is still uncertain. While even Amazon is now supporting the Act—having over the past few years embraced in-state warehouses for faster delivery—it is still opposed by other big retailers such as Etsy, who say that the $1 million threshold is too low and will negatively impact their business. As do a number of Congressional pro-business conservatives, who in the words of Republican Senator Ted Cruz, worry that it “will “hamper the entrepreneurial spirit” of internet sellers”.

Questions of online innovation notwithstanding, USA Today estimated that in New York alone, $865.5 million in sales tax went uncollected in 2012 because of untaxed online retail sales. That’s some money I’m sure cash-strapped New York would love to collect.


Ariel Bogle is a former publicist at Melville House.