Marketplace and Internet Tax Fairness Act

Wednesday, December 17, 2014

Despite the best efforts of the state and local community, House Speaker John Boehner (R-OH) was unwilling to bring the Marketplace and Internet Tax Fairness Act to the floor for a vote by the full House of Representatives in the final days of the congressional session. The measure would have enabled state and local governments to compel online retailers to collect and remit taxes from remote sales, and extended the current moratorium on the taxation of Internet access for ten years. The current tax structure for online sales creates vast disparities between brick-and-mortar businesses and online retailers, and costs state and local governments an estimated $23 billion per year in taxes owed on remote sales. All 45 states that impose a sales tax already require consumers to pay a tax on online purchases. However, there is no federal law enabling states to compel online stores to require consumers to pay this tax. In the absence of such a law, these taxes are not being paid, and local businesses are being put at a 5 to 10% competitive disadvantage to remote sellers.

House Speaker Boehner and House Judiciary Chair Bob Goodlatte (R-VA) have committed to considering issues related to marketplace fairness in the next Congress. Congress did, however, pass a one-year extension of the Internet Tax Freedom Act, until October 15, 2015, which will continue to limit the ability of states and localities to tax Internet access. The enactment of the Marketplace Fairness Act legislation, as well as an end to the moratorium on the ability of states and localities to tax Internet access, will remain priority issues for GFOA in 2015.