American Society of Magazine Editors

Call for Nationwide Internet Sales Tax Picks Up Speed in Congress

May 3, 2013

Following an overwhelming show of support in a non-binding vote during the 2014 budget resolution process in March, in a surprise development, Senate Majority Leader Harry Reid in April moved to take up the Marketplace Fairness Act. The Act is a bill that aims to refill depleted state coffers by removing the prohibition put in place by the Supreme Court's Quill decision on the collection of sales tax by retailers who do not have nexus in the state where the buyer is located. 

The Marketplace Fairness Act, introduced by Senators Michael Enzi (R–Wyo.), Dick Durbin (D–Ill.) and Lamar Alexander (R–Tenn.), would require online retailers to collect sales tax on behalf of other states, regardless of a company’s physical location.  Currently, online retailers are only accountable for sales tax in jurisdictions where they have a physical presence. Senators Ron Wyden (D-Ore.) and Kelly Ayotte (R-N.H.) have come out in opposition to the bill, pointing to the increased burden on online retailers due to the complex and diverse nature of state tax codes.
Despite bipartisan support and bipartisan opposition, it appears that the measure is likely to pass in the Senate.  The outcome in the House, should they choose to take it up in the fall, is somewhat more difficult to predict, with many Republican legislators likely viewing this as a tax increase.  
For magazine publishers, the impact of the Marketplace Fairness Act, if it were to pass both Houses of Congress, is likely to vary from member to member, based on their current nexus situation.  Online retailers, including magazine publishers, continue to maintain that collection of sales tax in states where they don’t have nexus is a burden. As part of the hard fought battle on this bill over the years, the current version of the bill contains a valuable concession - streamlined implementation at the state level, with a single point of contact, audit, and form for each state.