The Marketplace Fairness Act, also known as the “Internet Sales Tax,” passed the Senate Monday evening on a bipartisan vote of 69-27. The bill, long expected to find Senate success, now moves to the House of Representatives and an uncertain future.
Currently, customers shopping at online retailers that lack a physical presence in the customer’s state aren’t charged sales tax when they purchase goods. Instead, they’re expected to report such purchases in their annual tax filings. Few online shoppers actually do so, costing states an estimated $11 billion in lost tax revenue and giving what some commentators argue is an unfair competitive advantage to online sellers.
The Marketplace Fairness Act (MFA) is designed to close this loophole. It would allow states to require online retailers collect and remit sales tax from out-of-state customers to the appropriate state. Online retailers making less than $1 million annually would be exempt.
Owners of brick-and-mortar retail stores, who hope the MFA will help them compete with online retailers, applauded the Senate’s vote.
“The Senate’s overwhelmingly bipartisan passage of this legislation foreshadows the end of the special treatment of big online businesses at the expense of retailers on Main Street,” said Bill Hughes, senior vice president for government affairs at the Retail Industry Leaders Association, in a statement. “After such a resounding vote in the Senate, we look forward to a constructive debate in the House to level the playing field for all retailers this year.”
eBay, however, is urging the House to consider an amendment that would increase the MFA’s small business exemption to include online retailers making less than $10 million annually or those with fewer than 50 employees.
“The contentious debate in the Senate shows that a lot more work needs to be done to get the Internet sales tax issue right, including ensuring that small businesses using the Internet are protected from new burdens that harm their ability to compete and grow,” said Brian Bieron, eBay’s senior director of global public policy. “eBay will continue to focus on bringing greater balance to the legislation by protecting small businesses with less than $10 million in sales or fewer than 50 employees.”
The MFA has strong Democratic support, but it’s causing a rift among the GOP. Some Republicans see it as a pro-business bill, while others remain skeptical of enforcing a new regulation of small businesses. The MFA’s fate is in the hands of the Republican-controlled House, so it’s this Republican divide that makes the MFA’s future so difficult to discern.
The Obama administration supports the MFA, so it will likely become law if it does pass the House. Is it time for an Internet sales tax? Share your thoughts in the comments.
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