By Max Behlke
On this day, exactly one year ago, the U.S. Senate acted to level the playing field for all retailers. Sixty-nine senators from both parties voted to pass the Marketplace Fairness Act, legislation that would allow states that enact the minimum simplifications contained in the act the authority to enforce their sales tax laws, and sent it to the House of Representatives for consideration . . . and there it remains.
Representative Bob Goodlatte (R-VA), chairman of the House Judiciary Committee, has taken a deliberate approach by releasing principles last September and by holding a hearing on the topic in March. But he has yet to hold a hearing on the Senate-passed bill or similar legislation. Haven’t we waited long enough?
In 1930, Mississippi imposed the first state sales tax in the nation. Since then, the tax has grown to be the major revenue source for most every state. In fact, in six states, it accounts for more than half of all state revenue. In the remaining 40 states with a sales tax, it accounts for more than one-third of revenues. Unfortunately, this revenue stream, and the autonomy of states to determine their own tax regimes, continues to erode as Congress has yet to fix the remote/online sales tax loophole.
As a result of two Supreme Court decisions, a state with a sales tax is currently unable to collect sales taxes from out-of-state purchases made by its residents. The court, however, strongly implied that this was an issue that should be addressed by Congress. States are losing billions of dollars annually from uncollected sales taxes, and the loss is growing because of the explosion of online retailing. This problem will only increase with the expansion of Internet commerce.
NCSL is supportive of federal legislation that levels the playing field for all retailers without imposing any new costs or administrative burdens on online sellers. Sales tax should not be the determining factor of where consumers shop. Sadly, that is not currently the case. According to recent study conducted by Ohio State University, online retailer Amazon saw a 10 percent drop in sales in states where they are required to collect sales tax. For purchases more than $300, sales dropped by a staggering 24 percent. That is proof positive that a loophole in federal law is affecting consumer decisions—not the market or different business models. This problem needs to be resolved. Government should not be in the business of picking winners and losers.
At the 2013 NCSL Fall Forum, NCSL honored Senators Lamar Alexander (R-Tenn.), Dick Durbin (D-Ill.), Mike Enzi (R-Wyo.), and Heidi Heitkamp (D-N.D.) with the Restoring the Balance Award, bestowed upon federal officials who have worked to protect and advance the standing of the states in the federal system, for their leadership in passing the Marketplace Fairness Act. At this year’s Forum in December, we again look forward to bestowing the award, this time to champions in the House who stood for states and a level playing field. It’s about time.
Read more about the Market Fairness Act
Max Behlke is manager, State-Federal Relations, for the National Conference of State Legislatures Washington, D.C., office.