Internet Sales Tax Hangs In the Balance In the House of Representatives

On May 6, 2013, the United States Senate overwhelmingly passed the controversial Marketplace Fairness Act of 2013 (S. 743) (the "Act") by a 69-27 vote, despite strong opposition from online retailers like eBay and small businesses who rely primarily on online sales, sending it to House of Representations for consideration and final passage. A parallel bill is now at the House of Representations for consideration. However, approval in the House seems far from a sure thing.

The legislation, as passed by the Senate, would allow states to collect sales/use tax from internet retailers with gross sales over $1 million. Many online retailers, who had been successful in defeating similar proposals in the past, became resigned to the fact that an internet sales tax might finally become reality. The bill has momentum because of support from companies like Amazon, bipartisan support in the Senate, and support from many state governors, including anti-tax Republicans.

According to the Washington Post, tax-averse Republicans made it clear immediately that the Act would face strong opposition and scrutiny, as many saw it as yet another new tax on businesses. House Speaker John Boehner (R-Ohio) stated in early May that he would probably not support the Act. Boehner believes that the Act places too heavy of a burden on online merchants who would be required to calculate and charge varying sales tax rates depending on the destination of their products. Small online businesses have also aggressively stepped up lobbying efforts by forming eMainStreet Alliance, a grassroots organization established to oppose the Act.

It does not appear that the House will come to an agreement on the Act any time soon. House Judiciary Committee Chairman Bob Goodlatte (R-VA), whose committee is tasked with initial consideration of the Act, had indicated that consideration of an internet sales tax proposal would require deliberation and that the House would likely work on alternatives to the Senate version.

It appears that the House is in no rush to pass an internet sales tax. Goulston & Storrs will continue to monitor developments in the House and provide updates on any significant actions.

Related topics: Retail, Tax