The feature is currently being tested in several of Drizly’s markets. It is expected to launch early next year.
A Senate bill would make it easier for states to collect web taxes.
A bipartisan bill introduced in the U.S. Senate today goes beyond prior proposals in making it easier for more states to collect sales tax from Internet and catalog retailers. The proposed law exempts retailers with less than $500,000 in annual sales to customers in states where a retailer doesn’t have a physical presence such as stores or distribution centers.
The bill, called the Marketplace Fairness Act, would authorize states that have taken steps to simplify sales tax collection to require all online and catalog retailers over the exemption threshold to collect sales tax from in-state customers. If enacted into law, the legislation would supersede existing federal law that says states can mandate sales tax collection only from retailers with an in-state physical presence, or nexus, such as stores or distribution centers.
Introduced by Sen. Mike Enzi (R, WY), Sen. Dick Durbin (D, IL) and Sen. Lamar Alexander (R, TN), the Marketplace Fairness Act bill goes beyond similar legislation, called the Main Street Fairness Act, that Durbin submitted in July.
The Marketplace Fairness Act resembles Durbin’s earlier bill in that it would authorize states that follow the guidelines of the Streamlined Sales Tax and Use Agreement to require Internet and catalog retailers to collect sales tax on in-state orders and remit the collected revenue to the states. Twenty-four states have signed on to the agreement, though more states are expected to fully comply with it once it is supported by federal law, says Scott Peterson, executive director of the governing board of the Streamlined Sales Tax Project.
But the Marketplace bill goes beyond Durbin’s earlier bill by stipulating that states not signed on to the SST agreement will also be able to mandate sales tax collection and remittance if they take other minimum steps to simplify tax collection. It wasn’t immediately clear what kind of sales tax simplification measures would be required, though experts say they would likely be easier to deal with than the guidelines of the SST agreement.
In addition, the Marketplace bill exempts retailers with less than $500,000 in annual remote sales. The Main Street Fairness Act calls for a small retailer exemption, but doesn’t set a sales threshold. Retailers with a physical presence in a state would still be required to collect sales tax regardless of their annual sales volume, as they are today.
The new Marketplace bill elicited strong comments from the retail industry both for and against the legislation. Amazon.com Inc., the world’s largest retailer by web sales, and retail industry trade groups that represent retail chains—including the National Retail Federation, the Retail Industry Leaders Association and the Outdoor Industry Association—issued statements today in strong support of the bill. “Over the last 20 years the retail industry has changed dramatically, but unfortunately our antiquated regime for sales tax collection has not kept up,” NRF president and CEO Matthew Shay said. “In a 21st century retail industry, we ought to have a 21st century system to ensure uniform collection of sales tax.”
"Amazon strongly supports enactment of the Enzi-Durbin-Alexander bill and will work with Congress, retailers, and the states to get this bi-partisan legislation passed," says Paul Misener, Amazon vice president, global public policy. Amazon is No. 1 in the Internet Retailer Top 500 Guide and was listed among last year’s Internet Retailer Hot 100 Best Retail Web Sites.
But Amazon rival eBay Inc. and organizations representing Internet and catalog retailers have come out strongly against the bill. EBay contended today that the small business exemption would still work against the large number of relatively small retailers generating more than $500,000 in remote sales.
“This is another Internet sales tax bill that fails to protect small business retailers using the Internet and will unbalance the playing field between giant retailers and small business competitors,” says Tod Cohen, eBay’s vice president for government relations and deputy general counsel. “It does not make sense to expand Internet sales tax burdens on small businesses at a time when we want entrepreneurs to create jobs and economic activity.”
The Direct Marketing Association, which represents web and catalog retailers as well as other direct-to-consumer marketers, issued a statement today that the Marketplace Fairness bill “does not provide the needed harmonization across state taxing structures.”
Steve DelBianco, executive director of NetChoice Coalition, a group that lobbies federal officials on behalf of Internet retailers, says that small retailers will have to bear new costs in processing sales tax. “Of course, most businesses pass the sales tax along to the consumer,” he said, “so it won’t take long for voters to realize that the promised new tax revenue would be coming from their pockets—not from some out-of-state retailer.”
Although the Marketplace Fairness bill doesn’t currently have a companion bill in the U.S. House of Representatives, it’s at least partly complementary to a bipartisan House bill submitted last month by Rep. Steve Womack (R, AR) and Rep. Jackie Speier (D, CA), a spokeswoman for Durbin says. The Womack-Speier bill also seeks to give states more leeway in mandating sales tax collection.
In addition, Rep. Peter Welch (D, VT), who submitted a House version of Durbin’s Main Street Fairness Act earlier this year, is said to be interested in introducing a companion bill to the new Marketplace Fairness bill. A spokesman for Welch was unable to confirm that today, but noted that Welch has been an enthusiastic supporter of Durbin’s sales tax legislative efforts.
The new bipartisan support for sales tax legislation has encouraged some supporters of the legislation, who believe it has a better chance than past bills of making it into law. “The level of support for this legislation exceeds that of any other attempt,” says the SST’s Peterson. “We believe that support will produce the result that states and business have long sought.”