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April 29, 2013

Setting the Record Straight on the
Marketplace Fairness Act | S.743

On Monday, May 6, the U.S. Senate is scheduled to vote on final passage of the Marketplace Fairness Act (MFA), S. 743, legislation that will fix a loophole that unfairly allows remote businesses to have a price advantage over local businesses. The bill also returns the ability of states to enforce their own laws.

“We hear story after story from small business owners who spend time with potential costumers only to see that customer walk out the door to buy the same product online tax free. You see firsthand how this federal loophole is allowing government to pick winners and losers. I would like to see an opponent of this bill tell one of these main street business owners that the Marketplace Fairness Act, which simply levels the playing field for all retailers, isn’t the common sense thing to do.” —Neal Osten, director of the NCSL Washington D.C. Office.     
 

Opponents of the legislation have been spreading misinformation. It's time to set the record straight.

Myth: MFA is a new tax that violates the Americans for Tax Reform’s pledge.
Truth: It is not a new tax or a tax increase and clearly does not violate the pledge. Consumers already owe this tax, though few choose to remit it. This legislation removes consumers from the liability of having to remit the taxes they already owe, in turn, removing the chance of being audited by departments of revenue because of their unmet tax liability.

 “I’m a co-signer of the pledge. I’m a co-signer of the legislation. We have to collect the taxes that are due.”
—Representative Austin Scott (Ga.-R), April 29

Myth: MFA will hurt small business.
Truth: The small seller exemption exempts 99 percent of online retailers from having to collect. Not only will this legislation not hurt small business, its passage is in fact vital to protect the main street retailers around the country who provide jobs in our communities. Main street businesses comply with the laws in their states. If out-of-state retailers want to conduct business and make money from the same constituency, it is only fair that they comply by the same laws. Nothing more, nothing less.

Myth: The Marketplace Fairness Act is too confusing for small businesses to comply.
Truth: The legislation requires states to provide software to businesses that instantly calculates the correct rate. 21st Century software has made collection and remittance of sales taxes from any jurisdiction in the country seamless.

Myth: MFA is a cash grab for states.
Truth: States only want the ability to enforce their own laws. The ability to collect taxes that are already owed would give states the option to reduce existing taxes, avoid a new tax or pay for services without raising taxes.

"This legislation boils down to two words: states' rights," Tennessee Senator Lamar Alexander said on the floor of the Senate on April 22. "We ought to support states' rights by letting Tennessee and other states decide whether they want to collect taxes that are already owed, and how to treat businesses fairly in the marketplace. Tennessee wants to avoid a state income tax and treat businesses fairly in the marketplace, and it shouldn't have to play 'Mother, May I?' with the federal government to do so."


NCSL is a bipartisan organization that serves the legislators and staffs of the states, commonwealths and territories. It provides research, technical assistance and opportunities for policymakers to exchange ideas on the most pressing state issues and is an effective and respected advocate for the interests of the states in the American federal system.