E-Fairness

Traditional brick and mortar retailers and online retailers currently operate under two different tax scenarios that create an unbalanced competitive environment.  While brick and mortar stores must collect state and local sales taxes, online operators are not required to collect these taxes unless they have a physical presence in the state.  This difference in tax collection requirement can give e-retailers a significant price advantage before any other competitive factors come into play.

In 1992, the Supreme Court ruled in the case of Quill Corp. v. Heitkamp (504 U.S. 298) that a company must have a physical presence in a state – often referred to as “nexus” – in order for that state to require the company to collect sales taxes.  The sales taxes are still technically owed to the state, but the decision limited the states’ ability to collect from remote retailers.  The ruling also explicitly found that Congress could overrule this decision by passing legislation to authorize states to collect sales taxes.  The Quill decision has governed the development of e-commerce over the last twenty years, and – in the absence of Congressional action – its finding that a company must have nexus in order to be required to collect sales taxes has limited the ability of states to treat brick and mortar and online retailers equally.

FMI strongly supports legislative action to create a level playing field for brick and mortar retailers and urges Congress to act quickly to pass e-fairness legislation.

Recent E-Fairness Legislation and FMI Materials:

• FMI One-Pager on E-Fairness
  
• Marketplace Fairness Act of 2013 (H.R. 684 / S. 336)
  • FMI Statement on Bill Introduction

• Marketplace Equity Act (H.R. 3179)
  
  • Introduced by Rep. Steve Womack (R-AR) and Rep. Jackie Speier (D-CA)
    
  • Would authorize states to require online retailers to collect sales taxes, as long as certain conditions are met
    
  • House Judiciary Committee Hearing: "H.R. 3179, the Marketplace Equity Act of 2011" (July 24, 2012)
• Marketplace Fairness Act (S. 1832)
  
  • Senate companion to the Womack-Speier legislation
    
  • Introduced by Senators Enzi (R-WY), Durbin (D-IL), and Alexander (R-TN)
    
  • Similar to the House bill, but lowers the small seller exemption to $500,000 and adds additional conditions
    
  • Senate Commerce Committee Hearing: "Marketplace Fairness: Leveling the Playing Field for Small Business" (August 1, 2012)

FMI's Andy Harig discusses the latest legislative action on "e-fairness" and online sales tax collection