Last night, a substantial majority of Senators voted to end debate and thus to advance the Marketplace Fairness Act, a bill that would allow states to require “remote” retailers to collect sales taxes on purchases “sourced to” that state. The bipartisan 74–20 vote suggests that the bill will likely pass the Senate. The bill’s fate in the House of Representatives, however, remains uncertain.
The version of the bill voted on yesterday would require a state to meet certain “simplification” criteria before it could collect taxes from remote retailers, such as providing a single tax return to be filed with a single entity responsible for all sales tax administration. A state that meets the simplification criteria could require remote retailers to collect sales taxes for sales whose delivery location is in that state — or, if no delivery location is specified, the customer’s residence or billing address. The draft legislation provides an exception for “small sellers,” whose gross annual receipts from remote sales in the United States are $1 million or less.
Unlike some state statutes — such as the New York law we blogged about earlier this month — the Marketplace Fairness Act would treat all remote retailers equally, regardless of whether they use “affiliate” advertising programs and regardless of whether they make sales via the internet or mail order catalogs. Indeed, the issue predates widespread use of the internet: twenty years ago, the U.S. Supreme Court held that the federal Constitution prohibits a state from collecting sales and use taxes from retailers that lack a physical presence in the state. The Court emphasized, however, that “the underlying issue is not only one that Congress may be better qualified to resolve, but also one that Congress has the ultimate power to resolve.” Fittingly, the losing party in that case — North Dakota’s tax commissioner Heidi Heitkamp — now serves in the U.S. Senate, and yesterday evening cast her vote in favor of the bill.
Dustin Cho contributed to this report.