The Marketplace Fairness Act is Back!
MULTI-STATE: Online retailers will have a few changes to their sales tax laws if the Marketplace Fairness Act is approved. A bipartisan group of senators introduced the bill on Tuesday (3/10/15). The Marketplace Fairness Act of 2015 would give states the option to require out-of-state businesses, such as those selling online or through catalogs, to collect and use taxes already owed under state law the same way local businesses do. It relies on the Streamlined Sales and Use Tax Agreement among states.
“The Marketplace Fairness Act is about supporting the jobs we have in our towns,” Mike Enzi, R-Wyo., said in a statement. “It is about the people who are our neighbors who work in our local stores. Right now, thousands of local businesses are forced to do business at a competitive disadvantage because they have to collect sales and use taxes and remote sellers do not. The Marketplace Fairness Act would put Main Street businesses on a level playing field with online retailers. In 2013, the Senate passed this bill with bipartisan support. It’s time to give states the right to enforce their own laws without having to get permission from Washington.”
Sales tax is already currently due on all sales, including online sales, in 45 states. This reform would do a few things. First, it would simplify state collection policies to make it easier for multi-state retailers to remit tax due to all states. Second, it would give states more power to go after the sales tax they are due from out-of-state retailers. States would have 2 options: Join the Streamline Sales and Use Tax Agreement or adopt simplification mandates.
The Streamline Sales and Use Tax Agreement or SSUTA, was designed by 44 states and over 85 businesses over the course of 11 years with the one goal of simplifying multi-state sales tax laws to reduce the burden of tax compliance for the retailer. The program would focus on improving the tax system in the following ways:
- State level administration of sales and use tax collections.
- Uniformity in the state and local tax bases.
- Uniformity of major tax base definitions.
- Central, electronic registration system for all member states.
- Simplification of state and local tax rates.
- Uniform sourcing rules for all taxable transactions.
- Simplified administration of exemptions.
- Simplified tax returns.
- Simplification of tax remittances.
- Protection of consumer privacy.
Currently, 24 states have joined the SSUTA voluntarily. (Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Dakota, Utah, Vermont, Washington, West Virginia, Wisconsin, & Wyoming). The state of Tennessee is currently working on getting their laws charged to join the SSUTA as well.
Alternatively, states can adopt 5 simplification mandates. They must agree to:
- Notify retailers in advance of any rate changes within the state
- Designate a single state organization to handle sales tax registrations, filings, and audits
- Establish a uniform sales tax base for use throughout the state
- Use destination sourcing to determine sales tax rates for out-of-state purchases
- Provide free software for managing sales tax compliance, and hold retailers harmless for any errors that result from relying on state-provided systems and data
Though former Senate Majority Leader Harry Reid (D-NV) backed it, a similar bill was introduced in 2013, but never made it past the Senate. Current Senate Majority Leader Mitch McConnell (R-KY) is not a fan of the bill and neither is House Judiciary Chairman Bob Goodlatte (R-VA). He is drafting his own bill which levies taxes based on where the retailer is located, rather than where the buyer is located.
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