Bipartisan bills to allow states to collect taxes on goods purchased online have been introduced in the U.S. House and Senate.
The ICSC-backed bills are designed to correct what is seen as an unfair advantage online retailers have over brick-and-mortar stores; while the latter are required to collect and remit sales taxes, online retailers only have to do so if they have a physical presence — such as a warehouse — in a state.
“Folks shouldn’t have to pay a premium at the register just because they’re supporting a local business,” said Rep. Kristi Noem (R–S.D.). “Unfortunately, the existing inequality means the deck is too often stacked against our main street retailers.”
Noem was one of several co-sponsors from both parties of the Remote Transactions Parity Act, which was introduced in the House on Thursday. Senators simultaneously introduced the Marketplace Fairness Act.
Sen. Mike Enzi (R-Wyo.), a lead sponsor of the Senate bill, said the measure “is about supporting jobs and services we have in our towns, while ensuring states have the ability to collect taxes they are owed, if they choose to.”
A previous Marketplace Fairness Act passed in the Senate in 2013 by a bipartisan vote of 69 to 27, but was not taken up by the House. Research by ICSC and the National Conference of State Legislatures concluded that states lost an estimated $26 billion to the online sales tax loophole in 2015.
Businesses with annual sales of less than $10 million would continue to be exempt from collecting and remitting state sales taxes under the House bill. The exemption threshold under the Senate bill would be annual sales of $1 million
“We are pleased that legislation was reintroduced in Congress this week to empower states to modernize their tax laws and provide parity to local businesses and the communities they serve,” said ICSC President and CEO Tom McGee. “These important measures will fix an outdated tax loophole that currently gives online retailers a price advantage of up to 10 percent over brick-and-mortar stores, has shortchanged communities on much-needed sales tax revenue and overcomplicated our country’s current sales tax system.”