2013’s holiday shopping season saw a rise in online purchases. Across the country, politicians, states and vendors are debating the good and the bad of a comprehensive tax system for online retailers. Smaller online shops feel the current tax system provides additional burden for competing with big online retailers, while states contend that they are losing far too much revenue from online sales.
As vendors struggle with the concept of fair online taxes, events have unfolded in 2013 that will affect the outcome. Here is the current timeline of events:
May, 2013: The Marketplace Fairness Act (MFA) of 2013 was passed by the Senate. According to their website, this act grants states “the authority to compel online and catalog retailers (“remote sellers”), no matter where they are located, to collect sales tax at the time of a transaction.” However, this authority is contingent upon states having “simplified their sales tax laws.” The bill was passed with support from both Democrats and Republicans.
September 18, 2013: House Judiciary Committee Chairman Bob Goodlatte wrote a framework of seven basic principles that he believes should govern remote sales tax legislation. These guidelines aim to keep off line and online shops on equal footing, protect consumers, simplify the process and retain state sovereignty. See the complete list at on Goodlatte’s website.
October, 2013: According to Tax.org, State Tax Notes writer Amy Hamilton reports that several sources claimed Goodlatte was reworking “not only the small-seller exemption but also the single-audit requirement.”
December 3, 2013: The Supreme Court refuses to rule on the Amazon and Overstock’s debate with New York State over the collection of online taxes.
January 7, 2014: A consortium of hundreds of National, Sate and Local Trade Associations and small businesses across the country, including the U.S. Chamber of Commerce, signed a letter to Goodlatte, urging Congress to legislate marketplace fairness regarding sales tax. The companies and associations contend that recent rulings regarding online sales tax have hurt small companies. (Read the full letter here.)
January 11, 2014: According to The Hill, Goodlatte reportedly wants House Judiciary to hold a hearing in the first half of the year.
The battle lines are drawn. Supporters for MFA include not only those who drew up the letter to Goodlatte, but the Retail Industry Leaders Association, Walmart, Amazon, large name box store retailers such as BestBuy and Target, and President Obama. The bill is also opposed by a number of groups, including states that do not levy sales tax, The Competitive Enterprise Institute, The National Taxpayers Union, TruST, The American Catalog Mailers Association, and several small business organizations. While lobbyists on both sides make their case, the ball for now is in Goodlatte’s court. Keep your eyes peeled for the Judiciary hearings before the summer.
Are you affected? If you have less than $1,000,000 of online sales as of this writing, you are not. Retailers who have more than this amount must comply with the standards. Accurate Tax is a SSUTA Certified Service Provider that can help your company with compliance.