Why you should care about online sales tax legislation

Think the debate on online sales tax only applies to online retailers? Think again.

From brick-and-mortar to multichannel to online pure plays, if you’re in retail, you need to know about three legislative proposals currently under consideration by Congress. Why? Because if passed, online sales tax collection changes will significantly impact your business, be it online or offline.

We live in the days of omnichannel retailing, where retailers strive to keep their brick-and-mortar roots while leveraging innovative digital technologies that improve the customer experience. But unlike most of their online counterparts, brick and mortar retailers must comply with 7,600 different state and local sales tax systems – creating two separates systems, one online and one offline which are blatantly uncompetitive and unfair.

But sales tax fairness is about more than fairness among retailers – it’s about protecting small businesses and local retail jobs that are crucial to America’s towns and cities. Should federal legislation pass on this issue, state and local governments would receive $24 billion in additional revenue to support essential services – like teachers, police officers, firefighters and ambulance crews.

It’s NRF’s view that businesses need a 21st century tax system that works with 21st century retail. And now is the time for Congress to act.

Recently, Congressional leaders have introduced three main legislative proposals that seek to establish a 21st century way of collecting sales tax online. NRF strongly supports these efforts as legislation would make it easier for states to require all retailers – online and catalogs – to collect sales tax in the same manner as local stores – which will benefit us all.

And consumers agree. According to a recent Purple Strategies poll, eight in 10 Americans think we need a clearer approach to sales tax collection. And, according to a recent WSJ.com readers poll, over 60% of Americans believe state sales tax should always apply to online sales.

Want to know more about current proposals before Congress? Be sure to visit NRF's new Sales Tax Fairness headquarters on RetailMeansJobs.com. And let your representatives in Washington know you support sales tax fairness for all through a letter or through a tweet.

South Dakota Retailers applaud introduction of e-Fairness bill

This SDRA news release was emailed to media statewide on November 14, 2011

     Main Street businesses are the backbone of the economy, and it's time for Congress to develop a backbone and pass bipartisan tax fairness legislation to protect those businesses, says the South Dakota Retailers Association.

     South Dakota would stand to gain close to $40 million in sales tax revenue if federal lawmakers approve the Marketplace Fairness Act introduced on November 9. Co-sponsored by South Dakota Senator Tim Johnson, the measure would end special treatment for online-only retailers, and create a true free market by leveling the playing field for all retailers.

     SDRA Executive Director Shawn Lyons says passage of the plan is way overdue.

     "We applaud Senator Johnson for backing this legislation, which in turn means he has the back of our Main Street merchants," said Lyons. "Unfortunately, over the years too many members of Congress have been unwilling to stand up to the giant internet conglomerates. The result is that those huge corporations have been able to avoid collecting and remitting tax that is rightfully owed on internet purchases. That means they have an unfair advantage over local businesses, and it also means the state doesn't get tens of millions of dollars in revenue that it deserves and needs."

      Online sellers are already required to collect sales tax from customers in their own states, but congressional action is needed because of a 1992 U.S. Supreme Court ruling. The court ruled in Quill v. North Dakota that retailers are required to collect sales tax from out-of-state customers only if they have a physical presence such as a store, warehouse or office in the customer’s state. The court held that the 45 state and 7,600 local sales tax systems across the nation were too complicated for a retailer to otherwise know how much tax to collect.

      This is the third major sales tax measure introduced or reintroduced this year. All would make it easier for states to require out-of-state sellers to collect the appropriate tax on internet purchases.

      The National Retail Federation (NRF) supports passage of the tax fairness legislation.

      “Over the last 20 years the retail industry has changed dramatically, but unfortunately our antiquated regime for sales tax collection has not kept up,” NRF President and CEO Matthew Shay said. “In a 21st Century retail industry, we ought to have a 21st Century system to ensure uniform collection of sales tax. A modern approach to this issue would provide states with additional revenue in order to protect jobs that are badly needed to support American families and keep our communities economically healthy. And it’s not just about retail – fair sales tax laws are needed so budget cuts don’t force layoffs for essential workers like police, firefighters and schoolteachers.”

The Retail Industry Leaders Association says the legislation would end the special treatment afforded online retailers like Amazon.com that allows them to forgo collection of state sales tax.

“A true free market is devoid of government preferences and special treatment,” said Katherine Lugar, Executive Vice President for Public Affairs at the Retail Industry Leaders Association. “The Marketplace Fairness Act will get government out of the way, restore the free market and close the loophole that has given an unfair advantage to online retailers like Amazon.com for over a decade.”

SDRA's Shawn Lyons agrees.

"This legislation doesn't impose a new tax. It simply enforces a tax that's already in place and is already owed but is going unenforced due to Congress failing to act," says Lyons. "We hope South Dakota Senator John Thune and Congresswoman Kristi Noem will join Senator Johnson in supporting this plan. It's good for our small town merchants, and it's good for South Dakota."

NRF says new bill shows momentum on sales tax fairness / South Dakota Sen. Tim Johnson is co-sponsor
From the National Retail Federation
11/11/11

The National Retail Federation (NRF) welcomed the introduction of the Marketplace Fairness Act on November 9, saying the measure shows momentum is quickly building for Congress to pass legislation requiring Internet merchants to collect sales tax the same as local businesses. NRF is also intensifying its lobbying, grassroots, advertising and earned media outreach to push for passage of sales tax fairness legislation.

“Over the last 20 years the retail industry has changed dramatically, but unfortunately our antiquated regime for sales tax collection has not kept up,” NRF President and CEO Matthew Shay said. “In a 21st Century retail industry, we ought to have a 21st Century system to ensure uniform collection of sales tax. A modern approach to this issue would provide states with additional revenue in order to protect jobs that are badly needed to support American families and keep our communities economically healthy. And it’s not just about retail – fair sales tax laws are needed so budget cuts don’t force layoffs for essential workers like police, firefighters and schoolteachers.”

“With three bills offered in just over three months, Congress has gotten the message and is ready to act,” Shay said. “As the industry that employs one out of every four Americans, we are determined to help make this goal become reality.”

NRF had led the retail industry’s efforts calling for federal legislation that provides sales tax fairness for more than a decade, and this week is launching a concerted push, involving lobbying, grassroots and communications, intended to convince Congress to pass sales tax legislation as soon as possible. The ads, media hits, www.RetailMeansJobs.com/SalesTaxFairness web site and an op-ed calling sales tax legislation “a down payment on fundamental tax reform” are aimed at getting the congressional Joint Select Committee on Deficit Reduction to act on the issue in the two weeks before it releases its report.

The Marketplace Fairness Act was introduced today by Senator Michael Enzi, R-Wyo., and becomes the third major sales tax measure introduced or reintroduced this year. All would make it easier for states to require out-of-state sellers to collect sales tax from their residents, but vary in their approach. Both the Marketplace Equity Act unveiled last month and today’s bill would require states to adopt a series of simplification steps, but the list of steps required by the Enzi bill is longer.
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Enzi’s bill has nine bipartisan cosponsors including Senate Majority Whip Richard Durbin, D-Ill., lead co-sponsor of the Main Street Fairness Act, along with Senators Lamar Alexander, R-Tenn.; John Boozman, R-Ariz.; Mark Pryor, D-Ariz.; Roy Blunt, R-Mo.; Tim Johnson, D-S.D.; Sheldon Whitehouse and Jack Reed, both D-R.I.; and Bob Corker, R-Tenn.

Online sellers are already required to collect sales tax from customers in their own states, but congressional action is needed because of a 1992 U.S. Supreme Court ruling. The court ruled in Quill v. North Dakota that retailers are required to collect sales tax from out-of-state customers only if they have a physical presence such as a store, warehouse or office in the customer’s state. The court held that the 45 state and 7,600 local sales tax systems across the nation were too complicated for a retailer to otherwise know how much tax to collect.