In 1992, The Supreme Court ruled that states can only require retailers to collect state taxes where they have offices or stores. The purchaser of a product shipped from out-of-state is supposed to voluntarily send the tax due to their state. Apparently, most of us forgot to volunteer these taxes. The National Conference of State Legislatures estimates that in 2012 states collectively lost more than $23 billion in sales tax revenue due to online sales.
A bill known as the Marketplace Fairness Act of 2013 would require businesses to collect tax due in states where businesses don’t have any physical presence.
Opponents claim that the bill would cost small business by requiring that they put in place methods of accounting and tax collection that they are not currently responsible for. Supporters of the bill believe it would stop customers from using Main Street businesses as showrooms and then buying online to avoid paying sales tax.
The bill, in its current form, exempts small business doing remote sales of less than 1 million dollars. As the bill gains momentum in the Senate and with already strong support in the House, opponents hope to at least change the exemption to 10 million dollars or companies with less than 50 employees.
Marketplace Fairness Act of 2013 – Authorizes each member state under the Streamlined Sales and Use Tax Agreement (the multi-state agreement for the administration and collection of sales and use taxes adopted on November 12, 2002) to require all sellers not qualifying for a small-seller exception (applicable to sellers with annual gross receipts in total U.S. remote sales not exceeding $1 million) to collect and remit sales and use taxes with respect to remote sales under provisions of the Agreement, but only if such Agreement includes minimum simplification requirements relating to the administration of the tax, audits, and streamlined filing. Defines “remote sale” as a sale of goods or services into a state in which the seller would not legally be required to pay, collect, or remit state or local sales and use taxes unless provided by this Act.
A vote is expected on Monday, April 29th.