Another year, another attempt at the Main Street Fairness Act.
With billions of dollars worth of sales tax going uncollected, legislators and big box retailers are once again joining forces to promote online sales tax collection.
Last week, Sen. Dick Durbin of Illinois and Representatives John Conyers of Michigan and Peter Welch of Vermont introduced the Main Street Fairness Act to both houses of Congress. The bill, which was also introduced last year but never voted on, would simplify – or overcomplicate – sales tax collection, depending on whom you talk to.
If passed, the act would require online retailers to collect sales tax on all their customers’ purchases, regardless of whether the retailer has a physical presence in the buyer’s state. Currently, if the retailer does not have a presence in the buyer’s state, then it is the buyer’s responsibility to pay use tax to their state.
Amazon.com has famously terminated affiliate agreements in California, Colorado, Illinois, Connecticut, Arkansas, North Carolina, Hawaii and Rhode Island after these states passed online sales tax laws. Based on these actions, one might conclude that Amazon has a philosophical problem with collecting sales tax.
However, Amazon is actually one of the most vocal supporters of the Main Street Fairness Act. In a recent conference call, Amazon’s chief financial officer said that Amazon has always supported a “federal simplified approach” to online sales tax, rather than a patchwork of potentially differing state laws. The retailer continues to fight individual state laws while simultaneously supporting the uniform effort.
Online auction site eBay, however, represents the opposition to the act. Their claim is that small online retailers do not have the resources to track and collect sales tax rates across the country. Doing so would represent a considerable financial burden.
Recognizing the validity of these objections, the text of the Main Street Fairness Act includes an exemption for small businesses. The legislation relies on the Streamlined Sales and Use Tax Agreement’s definition of a small business, which is any business with less than $500,000 in remote sales each year. The governing board of the SSTA also has authority to amend the threshold.
A University of Tennessee study estimates that nearly $24 billion in sales tax from out-of-state purchases goes uncollected across the country each year. With this much money up for grabs, it’s no surprise that states and the federal government are interested in the issue.
It’s too early to tell whether the Main Street Fairness Act will pass either house of Congress or whether, like last year, it will even have a full vote. If it does pass, buyers and sellers will have to become more knowledgeable of sales tax rates around the country.
