Back in 2014, we brought to your attention the Marketplace Fairness Act, a piece of legislation that would have allowed state governments to collect sales tax from retailers who sold goods to residents of their states online, but did not maintain a physical location in those states. That original bill managed to pass the Senate but never advanced beyond the committee stage in the House. Now, a bipartisan group of lawmakers is looking to bring it back.
The Marketplace Fairness Act of 2017 would give states the rights to require out-of-state businesses selling online or through printed catalogs to collect state sales taxes on purchases sold into those states. States wishing to enforce existing sales and use tax laws could do so by adopting one of two options:
The new Marketplace Fairness Act is enjoying bipartisan support in both houses of Congress and from major organizations like the National Governors Association, The Council of State Governments, and the National League of Cities. The US retail industry is also a major supporter.
Before you panic that your online sales could be taxed, you should know that the Marketplace Fairness Act would target online retail giants more than anything, as a “small seller exception” exists for online retailers with less than $1 million in annual remote sales. You’re likely safe, as the SBA estimates nearly 99% of online sellers fall into the “small” category.
What it would give you, if you’re selling online, is the ability to price your goods in a way that lets you compete with online retail giants that have, so far, been able to offer lower prices due to not paying sales and use taxes. It would close a huge tax loophole that currently gives online retailers a huge price advantage over brick-and-mortar stores. For local communities, it would also mean a huge increase in sales tax revenue. Experts estimate that state and local governments lose close to $25 billion annually because of untaxed online sales.
With strong bipartisan support and presidential backing (Trump indicated in a 2016 radio interview that he also supported taxing internet purchases), this bill stands a real chance. We’ll continue to monitor it as it moves through the approval process.