NEW YORK (AP) — Congress is again considering legislation that would force retailers to collect sales tax on transactions in states where they're not physically located.
A bipartisan group of 53 senators and members of the House of Representatives on Thursday introduced the Marketplace Fairness Act of 2013, which consolidates three separate bills that died in the previous Congress. If passed, the bill would require retailers to collect sales tax for any state or municipality where they make a sale, whether they're a brick-and-mortar retailer or sell goods over the Internet, through catalogs or by phone.
The latest version exempts small businesses with less than $1 million in out-of-state sales, an increase from $500,000 in the previous bill Marketplace Fairness Act. It also requires states to provide sellers with free software to help them collect sales tax.
The drive to require retailers to collect what's known as remote sales tax is supported mainly by states that are losing out on badly needed tax revenue, and traditional bricks-and-mortar retailers who feel their Internet rivals have a pricing advantage, simply because consumers don't have to pay the tax if they buy from an out-of-state retailer.
Opposition to the legislation has come from many small businesses that sell online. They argue that it would be an expensive administrative burden to require them to keep up with an estimated 15,000 tax rates across the country. There are an estimated 7,500 to 9,600 taxing jurisdictions, and they have varying tax rates on a wide range of goods. Some small retailers say they'll need to hire more staffers to handle collecting the taxes and filing tax returns with states.
One of the points of contention between the two sides is whether the revised bill would limit the burden on small retailers.
"We're encouraged by the progress the bill's sponsors have made to make states provide software to ease the compliance burden," said David French, a lobbyist for the National Retail Federation. The trade group, which represents traditional as well as online retailers, has argued in favor of the legislation to remove the advantages that out-of-state retailers have over their in-state rivals.
But the new bill doesn't do enough to streamline the tax collection process, said Bill McClellan, vice president for government affairs for the Electronic Retailing Association, which represents online retailers.
"There's no single sales tax rate per state, or a single set of definitions for goods that are taxable or tax-exempt," he said.
Out-of-state businesses have been exempt from collecting the tax under U.S. Supreme Court rulings that date back to 1967. But in its most recent ruling, in 1992, the court invited Congress to pass a law that would make it legal for states to force retailers to collect the tax.