The Senate today moved forward with a bill that could impose new tax-collection obligations on e-commerce companies.
While the Senate hasn’t t yet voted on the Marketplace Fairness Act itself, lawmakers did vote 74 to 20 to close debate on the bill, which could come to a full vote this week.
If passed, the bill will authorize state governments to require out-of-state retailers with at least $1 million in sales to collect tax from consumers. Supporters say the Marketplace Fairness Act will help brick-and-mortar stores to compete with online retailers. That's because brick-and-mortar stores must collect state sales tax. But the Supreme Court ruled in 1992 that out-of-state retailers can't be required to do the same unless they have an in-state presence, like a storefront.
Consumers are currently supposed to self-report their online purchases and pay sales taxes; observers think that few people do so 100% of the time.
The law is supported by Amazon and a host of big retailers with brick-and-mortar presences, but opposed by eBay and other groups. Among the critics is the Direct Marketing Association, which last week asked the Senate to put the brakes on the bill. In a letter to lawmakers, the group says that it's “unnecessary to rush into consideration of an Internet sales tax law without first going through regular order and giving all stakeholders an opportunity to explain their concerns.”
The ad group's specific concern is that the law will impose too many administrative burdens on Web businesses, which will have to comply with dozens of state and local tax codes.
Some lawmakers also expressed concern with the measure. Sen. Ron Wyden (D-Ore.) , for one, says the bill will “take the Internet down a very dangerous path.”
He argues that the law “endorses the position that Internet entities -- American businesses -- should enforce laws that are outside their home jurisdiction.” Wyden adds: “This could set a precedent that it is appropriate to require Internet firms to enforce many other areas of law that are enacted in jurisdictions where they are not located. Today, the Senate may be considering taxation, but tomorrow it may be asked to consider similar schemes to enforce laws and regulations about content, speech, religion and other issues that are important powerful political interests.”
Earlier today, Sen. Michael B. Enzi (R-Wyo.) argued in favor of the measure. He says that many brick-and-mortar stores must now deal with people who visit the stores, examine items in person, then decide to order the item online because it's cheaper -- which he attributes to the lack of sales-tax collection.
Given the apparent overwhelming support in the Senate, the measure seems likely to pass. But the bill might not sail through the House as easily.
Still, even if the Marketplace Fairness Act stalls in Congress, many online retailers are already collecting sales tax. Various states have also passed legislation requiring this. While some of the laws have faced challenges, the tide seems to be turning in favor of the sales-tax laws. Notably, New York's highest court recently upheld a state law requiring Amazon and other Web companies with in-state affiliate marketers to pay the tax -- even when their marketing efforts consist solely of placing links on their pages in exchange for referral fees.