The House and the Senate introduced bills (known as the Market Fairness Act of 2013) on February 14, 2013 that, if enacted, would grant states the authority to compel “remote sellers” (i.e., online and catalog retailers) to collect and remit sales tax on sales within the respective state no matter where the seller is located. The effect of this legislation would be to put brick and mortar retailers on equal ground with online retailers with respect to the collection of sales tax. The legislation, however, provides that each state must first have simplified their sales tax laws. Small sellers, those who have total annual gross U.S. remote sales not in excess of $1 million, would be excluded from the purview of the law.
While this legislation has plenty of opposition to overcome, it also has garnered a critical mass of supporters. One seemingly unlikely supporter of the bill is Amazon, whose Vice President for Global Policy wrote in a letter:
With respect to state sales tax collection, Amazon.com has long supported a simplified nationwide approach that is evenhandedly applied and applicable to all but the smallest volume sellers.
With this in mind, I am writing to thank you for your bill, which will allow states with simplified rules to require sales tax collection by out-of-state sellers who choose to make sales to in-state buyers.
This would mean that Amazon, for example, would be required to collect sales tax on all sales, even if it does not have a presence in the relevant state. This example assumes that the relevant state of purchase already imposes sales tax on the relevant sale and the state’s legislature also adopts enabling legislation. There is some debate whether Amazon’s support is due to new and recent state sales tax legislation aimed at requiring Amazon (and similar companies) to collect sales tax while other online retailers have been able to largely avoid this issue.
Regardless, the impact of this legislation is significant. In 1992, the U.S. Supreme Court ruled in Quill Corp. v. North Dakota (504 U.S. 298) that a business must have a physical presence in a state for that state to require it to collect sales tax. However, the court explicitly stated that Congress has the ultimate authority to decide otherwise and can overrule the decision through legislation. If enacted, the Market Fairness Act of 2013 would exemplify such overruling legislation.