Blog

Senators introduce Marketplace and Internet Tax Fairness Act

July 17, 2014

While the House has shown little interest in online sales tax legislation, the Senate is making a last-ditch effort to push an act on the issue forward in the face of the Permanent Internet Freedom Tax Act, according to National Journal.

While the House has shown little interest in online sales tax legislation, the Senate is making a last-ditch effort to push an act on the issue forward in the face of the Permanent Internet Freedom Tax Act, according to National Journal.

PIFTA, which the publication reports yesterday passed through the House by voice vote, would make permanent a moratorium on states’ ability to tax internet access.

The Internet Tax Freedom Act was signed into law by former President Clinton in 1998 and renewed with bipartisan support in 2001, 2004 and for seven years in 2007, explained Marketing Land. It is set to expire on November 1, 2014.

While some states had internet tax laws that were grandfathered into the clause – and are still in effect today – PIFTA would place a ban on taxing internet access. This would mean massive revenue losses for Hawaii, New Mexico, Texas, South Dakota, North Dakota, Ohio, and Wisconsin.

However the Senate has incentive to leave PIFTA dead on arrival as its own Marketplace Fairness Act – which would allow states to levy sales tax on e-commerce retails whether the hold a physical presence there or not – has been stalled in the House for a year.

However, the Senators Mike Enzi, R-Wyoming, Dick Durbin, D-Illinois, Lamar Alexander, R-Tennessee, Heidi Heitkamp, D-North Dakota, Susan Collins, R-Maine, and Mark Pryor, D-Arizona, last night introduced the Marketplace and Internet Tax Freedom Act, reported Marketing Land. The act would allow states to collect sales tax on orders from retailers with annual gross U.S. sales over $1 million, even if they do not have nexus – a physical presence – within the state.

The bill would also extend the moratorium on taxing internet access another 10 years, instead of making it permanent as PIFTA would if it passes the Senate, noted National Journal.

“It is so important to reject approaches like the Marketplace Fairness Act that passed the Senate last year, which would fundamentally discriminate against states that do not levy a sales tax and against U.S. companies versus their foreign competitors,” said Senator Ron Wyden, D-Oregon, who wrote the Internet Tax Freedom Act with California Republican Representative Christopher Cox.

“It would amount to a body blow to online retailers and services across the country,” he said.

Traditional retailers show support for MITFA
However, retail organizations have come out in support of MITFA, which they say would level the playing field for retailers, noted Publishers Weekly. Traditional retailers, in addition to e-commerce giant Amazon, have been in support of online sales tax for some time.

According to Daily Finance, in addition to online sales being taxable if the retailer holds a physical presence in the state, the same also holds true if the retailer has an “affiliate” in the state. Amazon, in addition to its numerous brick-and mortar fulfillment centers, sells many of its products through wholesale companies whose transactions are covered by the nexus affiliate laws in some states.

Leaders of both the International Council of Shopping Centers and the Retail Industry Leaders Association each expressed their support for MIFTA following its announcement last night.

“Retailers support keeping Internet access tax free while closing the online loophole that essentially subsidizes online-only retailers against their brick and mortar competitors. It’s time for the government to take its thumb off the scale and give all retailers a fair shot to compete in the free market,” said Bill Hughes, executive vice president for government affairs at RILA.

“Given the overwhelming bipartisan vote on the Marketplace Fairness Act in the Senate and near-universal support in the House for ITFA, it seems obvious that these issues can and should be resolved together this year.”

Back To Blog