The U.S. senate passed the Marketplace Fairness Act in 2013. This bit of legislation grants states the authority to charge sales tax to people who purchase goods from online retailers, no matter where the store is located. If Congress signs the bill, this is great news for brick and mortar stores because it evens the competition a little more. However, the bill is unpopular with consumers.Local retailers are already required to charge customers sales tax. The tax is applied at the time of purchase. Online tax would be applied in a similar fashion. However, there are several barriers states and online retailers would have to overcome. For instance, the Marketplace Fairness Act requires states to simplify their tax policies so that implementing sales tax across states is more uniform. Online retailers must also adjust their billing systems, which is costly, especially for retailers that have coded their own systems. This is the biggest reason the Marketplace Fairness Act is unlikely to succeed.
The Wall Street Journal reports that republicans in Congress are worried about how consumers would react to the bill. Online shoppers already have to pay for shipping, and adding a sales tax might make online shopping a lot less appealing. U.S. House Speaker John Boehner said he would oppose the bill.
From a retailer standpoint, it is unfair that brick and mortar stores must collect a sales tax for states while online retailers work in a tax-free internet environment. Over a year ago, the bill received broad bipartisan support. It is a simple concept, but difficult to implement.
The issue is complex because online sales have been tax free for over a decade. It’s hard to implement laws that change things for people on a day-to-day basis. There most likely will be tax reform in the future, but it’s unlikely that the Marketplace Fairness Act will be signed by Congress at this point.