During the next few weeks, the U.S. Senate will likely pass the Marketplace Fairness Act, requiring all states to collect sales tax from online purchases. It’s a common-sense measure designed to close an unintended multi-billion-dollar tax loophole for powerhouse Internet retailers.
Receiving strong bipartisan support in the Senate does not guarantee passage in Congress, nor does support for this legislation from large cyber retailers such as Amazon. As we have seen in the state Republican-controlled Senate, where the elimination of outdated tax dodges have met a stonewall, U.S. House Republicans have so far shown little enthusiasm for the bill.
For more than 20 years, online retailers have enjoyed nearly a 10 percent price advantage over local brick-and-mortar stores. This unfair tax treatment has hurt small Main Street businesses, who have found it difficult to compete with Internet powerhouses on price.
If Congress is serious about supporting small businesses and creating jobs on Main Street, they should pass the Marketplace Fairness Act without hesitation.
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Congress has taken too long to eliminate the tax break that resulted from a 1992 Supreme Court ruling (Quill v. North Dakota) prohibiting states from collecting sales tax if the business did not have a physical presence in that state. The case involved catalog sales, and never envisioned a world of burgeoning cyber shopping online retailers.
And because any resolution to the court’s decision involved interstate commerce, only the federal government could enact it.
But e-commerce is growing rapidly, and it is crippling states such as Washington that are dependent on sales tax revenue. If Congress does the right thing and passes this bill, Washington state eventually will benefit from an estimated $280 million annual windfall.
Several years ago, Washington signed on to the Streamlined Sales and Use Tax Agreement, a pact between states created in the federal vacuum of inaction to cooperate in collecting online sales taxes. The federal bill would bring all states into that fold, and level the playing field.
We hope House Republicans have been hearing from their small business constituents. There are positive signs. Republican Rep. Scott Rigell referred to “the hardworking men and women who have mortgaged their homes to buy or to rent a little brick-and-mortar shop.”
Perhaps others in Congress will agree with the ideological end run around the tax issue found by GOP Sen. Mike Enzi, who said, “Let’s clear up one thing: this is not a new tax. The Marketplace Fairness Act is not about new taxes ... We are talking about an existing state tax that purchasers already owe. And it is a tax on all sales, not on the Internet itself.”
If logic were to prevail, this is one measure on which all federal lawmakers should have no trouble finding agreement. If only it were that easy.