Dealers have wanted for years to “level the playing field.” Now, the Marketplace Fairness Act has passed the U.S. Senate and its prospects for becoming law are looking good — or are they?
Let’s get real. While it’s not garnering much news coverage, collecting tax on Internet sales is, in truth, such a political hot potato that it might never emerge from the House Judiciary Committee.
“It’s been an important issue for us for a long time,” Marine Retailers Association of the Americas president Matt Gruhn said. “The sales tax holiday for Internet retailers is clearly a major disadvantage to our Main Street marine retailers. It gives Internet sellers a 4- to 9 percent price advantage over local stores, so we are pushing hard for passage of the Marketplace Fairness Act.”
It’s the nation’s retailers against the anti-taxers. The former claim it’s simple fairness while the latter call it a new tax. Is it? The answer is “no” if you realize that existing law already requires all taxpayers to cough up unpaid sales or use taxes on all Internet purchases when filing their annual state tax return. Is everyone doing that? Hardly. So, in that sense the answer is “yes,” it’s a new tax — if you have to pay what you’re avoiding now, that is.
Politically, this issue is clearly a Catch-22. The bill passed the Senate by a margin of 69-27 with the majority of Democrats voting for it while Republicans were split with 21 yeas and 22 nays. In the House, the Republican majority is also split. There, voting on the bill will force them to take sides either against the retail business owners in their districts or against their party’s conservative base. Somebody’s going to be mad.
To further rattle nerves for the House majority, the Americans for Tax Reform, headed by anti-tax advocate Grover Norquist, is opposing the bill. Norquist claims a vote for the bill will be a violation of the “no new taxes” pledge many House Republicans signed.
Norquist is dead wrong. Paying tax on Internet sales is already a lawful tax that is due. The fact that people ignore it doesn’t negate it. Moreover, the bill does not mandate some new national tax, but only gives the states the option to require Internet marketers to collect the appropriate sales tax just like local brick-and-mortar stores must do now.
Further, for years opponents have argued that it would be too hard for online sellers to calculate proper sales taxes for thousands of cities, counties and states. The bill now addresses that by requiring any state that opts to require sales tax collection to provide the online sellers with free software that calculates the correct taxes. Gruhn correctly points out: “That argument no longer applies. Today, software has been developed which has eliminated the difficulty of calculating and remitting sales taxes for state and local jurisdictions.”
What’s it going to take to see this passed this year? The short answer is: your engagement. The long answer is: many members of the House (especially Republicans, but some Democrats, too) are lying low about their position. We can assume they are waiting to see where the most pressure might come from. Or they know if the bill comes up for a vote, they will have to make a choice between the best interests of small brick-and-mortar businesses and political expediency.
Accordingly, if you believe in the Marketplace Fairness Act, you must communicate to your representative that passage of the bill is long overdue . . . that it provides for equality in tax collections . . . that it’s absolutely not a new tax as opponents say and it does not violate any no-new-taxes position . . . and that it merely provides for the collection of sales taxes already due, but going uncollected now.
Remember, not hearing from you lets the bill’s opponents dictate the game.