In this Expert Insight, Sylvia F. Dion, owner of a state tax and employment tax consulting practice, analyzes the prospects so-called “remote seller” legislation being enacted by Congress before year’s end. While the Marketplace Equity Act has received much attention, Sylvia explains why a different measure—the Marketplace Fairness Act—might be the one that crosses the finish line.
Several months ago few would have speculated that one of the three federal remote seller proposals introduced by the current Congress - the Main Street Fairness Act (S. 1452/H.R. 2701), the Marketplace Equity Act (H.R. 3179), or the Marketplace Fairness Act (S. 1832) - would have advanced in an election year.
However, by early fall there was a renewed confidence that some form of federal remote seller legislation could indeed be passed. As Bloomberg BNA recently reported, by September, some lobbyist and policy analysts were predicting that federal remote seller legislation could advance in the lame duck session of Congress. (See “E-Commerce Sales Tax Bill May Emerge in ‘Fiscal Cliff’ Talks After Election,” Bloomberg BNA Tax News, 9/26/12) This consensus was also noted by Steven Roll, Bloomberg BNA’s assistant managing editor of state tax, who witnessed an upbeat atmosphere at a meeting of the Federation of Tax Administrators, and who observed that “people were talking about the legislation as if it were a fait accompli." (See “Widening the Net,” AccountingTODAY, 9/1/12)
But as we approach the final weeks of the current session, federal remote seller legislation has yet to pass.
Perhaps this is why the push by key sponsors of the Marketplace Fairness Act, a proposal some would argue has the best chance of passing, has intensified.
Just last week, the sponsors of the Marketplace Fairness Act attempted to have a remote seller collection amendment included in the Fiscal 2013 National Defense Authorization Act (“NDAA”) ( S. 3254 ). Much to their dismay, the Senate chose to vote on the NDAA, which was overwhelmingly approved by the Senate on December 4th, without the amendment.
On December 5th, the day after the Senate voted to pass the NDAA sans remote seller amendment, hundreds of state legislators convened to lobby for passage of the Marketplace Fairness Act. This lobbying effort, which included meeting with key sponsors of the Marketplace Fairness Act Michael Enzi (R-WY) and Steve Womack (R-AR), occurred while state legislators were in the Capital for the National Conference of State Legislatures ’ Fall Forum.
Why so little focus on the other two federal remote seller proposals?
Of the three federal remote seller proposals introduced by the 112th Congress, the first proposal, the Main Street Fairness Act, was never able to garner much attention. The proposal lacked bi-partisan support and would grant collection authority only to Streamlined Sales & Use Tax Agreement (“SSUTA”) full-member states.
On the other hand, the second proposal, the Marketplace Equity Act, has at times been viewed as a viable contender for passage. The Marketplace Equity Act was a bipartisan effort with no ties whatsoever to the SSUTA and had its own set of requirements that states would need to implement in order to be granted collection authority. For some, this lack of a connection to the SSUTA was perceived positively. During a November 2011 Judiciary Committee hearing, a question arose as to why any proposal should be allowed to “cede authority to the Streamlined Sales Tax Governing Board,” a non-elected organization. The Marketplace Equity Act’s small seller exception – the amount of sales that must be exceeded before a small seller is required to collect sales tax – is also the highest and most flexible of the three proposals. For instance, under the Marketplace Equity Act, remote sellers with annual U.S. gross receipts of $1 million or less would be exempt from collecting sales tax in states that implement the Marketplace Equity Act’s requirements. Implementing states also have the option of exempting remote sellers with $100,000 or less in gross sales to their state and determining higher threshold amounts.
However, despite the Marketplace Equity Act’s advantages, the proposal garnering the most attention in recent days is the Marketplace Fairness Act. Despite the lower small seller exception ($500,000 or less in annual U.S. gross receipts), the Marketplace Fairness Act offers states two options to obtain collection authority – states can either become SSUTA full-member states or implement the Marketplace Fairness Act’s alternative set of requirements.
What if federal legislation is not passed by the 112th Congress?
Will Congress exercise its Commerce Clause power to enact sales tax reform legislation? With so much focus on the “fiscal cliff,” it’s difficult to predict. Still, the supporters are relentless. A recent Computerworld article noted that"Senator Durbin is working with his colleagues ... to look for any opportunity to move the bill.” But iffederal remote seller legislation does not pass by January 3, 2013, the session’s final day, new legislation will need to be introduced by the next Congress.
Sylvia F. Dion, CPA is the Founder and Managing Member of PrietoDion Consulting Partners LLC, a State & Local Tax (SALT) and Employment Tax consulting practice. Sylvia is also a tax writer / blogger and is the creator and publisher of The State and Local Tax “Buzz”, a professional blog focused on SALT issues and developments. She also reports on “internet sales tax” developments as the Internet Tax contributor to the SalesTaxSupport.com blog. Her articles have been published in the Journal of Accountancy, Journal of State Taxation, Bloomberg BNA’s State Tax Weekly, Bloomberg BNA’s Multistate Tax Report and other leading tax journals. For more about Sylvia, visit her company website at www.sylviadioncpa.com or her tax blog at www.thestateandlocaltaxbuzz.com.
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