January 2015 marked the beginning of the 114th Congress and new momentum behind legislation that would compel retailers to collect sales taxes from online purchases. The first advance happened in March, when a bipartisan group of Senators – Senators Enzi (R-WY), Alexander (R-TN), Durbin (D-IL) and Heitkamp (D-ND) – introduced the Marketplace Fairness Act of 2015 (S 698). The second advance occurred in June in the House, when Congressman Jason Chaffetz (R-UT-3) and John Conyers (D-MI-13), Ranking Member of the House Judiciary Committee, among other bi-partisan supporters introduced legislation dubbed the Remote Transactions Parity Act (HR 2775). Both bills would compel retailers to collect taxes on remote sales based on the location of the consumer. The state in which the consumer resides could compel out-of-state retailers to collect remote sales taxes, either as a member of the Streamlined Sales Tax Governing Board or through the use of certified software providers.
This legislation will inevitably have to go through the House Judiciary Committee, chaired by Bob Goodlatte (R-VA), who has adamantly opposed both 2015 efforts. Goodlatte offered an alternative to Marketplace Fairness in January 2015, through draft legislation designed to enable state and local governments to collect taxes from internet sales based on the address of the retailer as opposed to the address of the consumer, a notion that would strip taxing authority from state and local governments. The GFOA has some serious concerns with this proposal, which you can review here.
We are working closely with our colleagues at the National League of Cities, U.S. Conference of Mayors, National Association of Counties and National Governors Association, along with our partners in the retail community, to urge Chairman Goodlatte to consider moving forward with the best solution, the Remote Transactions Parity Act. As congressional discussions continue on these legislative proposals, the GFOA will continue to keep you informed on the status of these discussions and continue to encourage you to engage your members of Congress directly to urge their support for the Marketplace Fairness Act using the resources below.
It is time to pass this important legislation and we need your help!
Your direct outreach to your member of Congress is critical to advancing this legislation through the federal legislative process this year. To help you with this outreach , please look below for a sample letter for your use. If you are able to send this along to your member of Congress please also email a copy of the letter to Emily Brock, Senior Policy Advisor, GFOA Federal Liaison Center.
What Can You Do To Help Pass the online sales tax initiatives?
The GFOA has developed a suite of advocacy materials for our members to use for this effort, including:
- Draft House letter: Remote Transactions Parity Act (HR 2775)
- Draft Senate letter: Marketplace Fairness Act (S 698)
- Draft op-ed
- Talking points
- A report on the impact of marketplace fairness on a sample of cities 2013
- Data on the total uncollected sales tax in 2012 in each state
- Contact information for your members of Congress
Why is this legislation necessary?
Consumer failure to pay online sales and use taxes as a result of federal inaction on this issue annually results in the loss of billions of dollars per year in taxes owed to state and local governments on remote sales. For example, according to the Department of Commerce, e-commerce sales in 2005 were $87 billion, and grew by nearly 40 percent to $225.5 billion in 2012. Correspondingly, the National Conference of State Legislatures revealed that these sales produced approximately $23 billion in unpaid sales and use taxes in 2012.
Passing The Marketplace Fairness Act would finally bring federal law into the digital age by enabling state and local governments to collect sales taxes on online purchases that are already owed to them but are not being paid, as well as level the playing field for brick and mortar retailers who are currently at a five to ten percent competitive disadvantage to remote sellers because Congress has failed to act to update national tax laws with respect to digital sales.