Internet Sales Tax Approved by Senate

The U.S. Senate has just passed the “Marketplace Fairness Act of 2013” which would allow a state to require all online sellers to collect sales and use tax on any sales made to customers within the state.  The fate of this new Act now rests in the hands of the House of Representatives. 

Under the 1992 Supreme Court decision in Quill Corp. v. North Dakota, it was decided a state could not require a seller to collect sales tax unless the seller had a physical retail location within the state.  However, in the years since the Quill decision, the rapid growth of e-commerce has dramatically changed the landscape.  Supporters of the new act propose that the main issue is fairness.  Because online retailers do not collect sales tax on in sales, they have an unfair advantage over other retailers in that they are able to sell their goods for a lower price than can be found in a store.  In addition, it has been estimated that among all states collectively, $23 billion dollars in revenue has been lost due to uncollected sales tax in 2012.  

What would this new Act mean for current online retailers?  All “Streamlined Sales Tax” (SST) state members would have the authority to require sales tax collection 180 days after the state notifies the public of its intent to exercise its authority under the “Marketplace Fairness Act”.  Non-SST states could not begin exercising this new authority until after the first day of the calendar quarter that is at least six months after the state enacts legislation and implements certain mandatory simplification requirements.

There is ONE exception to the “Marketplace Fairness Act”.  Under the “Small Seller Exception”, any seller with gross annual receipts from online sales in the preceding year of $1 million or less would not be required to collect sales tax.