Senate Holds Hearing to Discuss the Marketplace Fairness Act

Thursday, September 13th, 2012


The Senate Commerce Committee recently held a hearing to discuss the Marketplace Fairness Act (MFA), introduced by Senator Mike Enzi of Wyoming in 2011. S.1832, 112th Cong., 1st Sess (2011). The purpose of the bill is to give states the "ability to enforce their existing sales and use tax laws and to treat similar sales transactions equally, without regard to the manner in which the sale is transacted, and the right to collect--or decide not to collect--taxes that are already owed under state law." Essentially, the bill, if passed, would grant states the authority to require online retailers to collect and remit sales tax to the state in which their goods are sold, no matter where the online retailer itself is actually located. (Thus, the bill is similar to two other bills currently before Congress; click here for our previous article on this trio of bills.)

Under the MFA, states that wish to collect sales tax from remote sellers will be required to simplify their sales tax laws in order to make collecting tax from remote sellers easier. States can go about this in one of two ways: (1) they can become a member of the Streamlined Sales and Use Tax Agreement (SSUTA), which has already set about simplifying sales tax laws for its twenty-four member states; or (2) Non-SSUTA states can agree to perform the following five simplification mandates listed in the bill:

  • Alert retailers in advance of any sales or use tax rate changes;
  • Assign a single state organization to handle all sales tax registrations, filings, and audits;
  • Establish a uniform sales tax base for use throughout the state;
  • Implement destination-based sourcing to determine sales tax rates for out-of-state purchases; and
  • Provide retailers access to software and/or services for managing sales tax compliance, and hold retailers harmless for any error that might result from relying on these types of programs or services.

There is still some discrepancy between the House and Senate over the small-business exemption in the bill. The MFA (a Senate bill) exempts small businesses with gross annual sales of $500,000 or less from having to abide by another state's requirements that they collect tax on remote sales. A similar bill in the House exempts small businesses up to $1 million in gross annual sales.

If passed, the MFA would effectively reverse a 1992 Supreme Court decision that relieved many online retailers from the burden of collecting state sales tax from customers unless the retailer has an actual physical presence in the state. See Quill Corp. v. North Dakota, 504 U.S. 298 (1992).

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TTR has a website that companies subscribe to and use daily. This website provides a list of everything that can be bought or sold in the U.S. It provides simple answers to whether buying or selling these items is taxable (subject to a sales tax or other tax), and it provides all the legal authority to support these tax answers.

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