End the Online Sales Tax 'Break'



NLC calls on Congress to pass the Marketplace Fairness Act to place brick-and-mortar community businesses on a level playing field with online retailers and afford consumers more choice through fair competition.

    While the internet has created an exciting new marketplace, it has also put traditional retail outlets at an unfair competitive disadvantage because of outdated and inequitable tax and regulatory environments. Brick and mortar retailers are important constituents in local communities. They provide employment to residents, contribute to charities, and help to keep communities vibrant. However, they are unfairly put at a five to ten percent competitive disadvantage by following the law and collecting sales tax at the time of purchase, while remote online retailers are not required to do so. It is time to resolve the issue of remote sales tax collection.

    By passing Marketplace Fairness, Congress will level the playing field for all sellers and will provide fiscal relief for state and local governments without a penny coming from the federal Treasury.

    State and local governments' inability to require remote sellers to collect the legally imposed taxes on transactions resulted in an estimated $23 billion loss of revenue for states and local governments in 2012. This amount will only increase with the growth of online sales. Without federal action, state and local governments may have no choice but to increase sales tax rates, or even raise income and property taxes, in order to ensure balanced budgets. Increases in sales tax rates will only exacerbate the current price disadvantage already faced by main street sellers. If main street retailers cannot compete as a result of the growing disadvantage, the ripple effect in lost jobs and revenue on our communities will not be sustainable.

    In 1992, the Supreme Court's Quill decision urged Congress to address the issue of sales tax collection by remote sellers. Moreover, the recent decision by the Supreme Court not to consider a case involving a state law, in New York v. Amazon, magnified the need for Congress to level the playing field for all sellers as quickly as possible.

    Last year, the Senate passed the Marketplace Fairness Act, and earlier this year, the House Judiciary Chairman introduced principles to guide the drafting of legislation in the House. There is now a clear path forward for House legislation that would allow states and local governments the authority to require remote sellers to collect and remit sales taxes. This path will not harm small businesses, impose any new taxes, or affect federal revenues or expenditures.