WASHINGTON, DC (BRAIN) — The U.S. Senate will debate legislation this week that would empower states to collect sales tax from online businesses located outside their borders. The Senate could vote on the Marketplace Fairness Act as soon as Wednesday.
On Monday, the Senate voted 74-20 to start debate.
Also on Monday, White House spokesman Jay Carney said President Obama supports the bill. Carney said the current situation "puts local, neighborhood and neighborhood-based small businesses at a disadvantage to big, out-of-state, online companies. And because these out-of-state companies are able to cut corners and play by a different set of rules, the cities and states lose out on funding for K-12 education, police and fire protection, access to affordable health care, and funding for roads and bridges."
The act would authorize states to collect sales tax from out-of-state online and mail-order catalog vendors, but only if the state simplifies its tax collection system. Many states have already adopted the Streamlined Sales and Use Tax Agreement, which would allow them to benefit from the federal act. Online businesses with revenue of less than $1 million a year would not be required to collect the tax.
If the Senate passes the legislation, it would go to the House, where it may face opposition from anti-tax lawmakers, although arguably it does not create a new tax, it just enables the collection of existing taxes. Lawmakers from states that have no sales tax, such as New Hampshire, also oppose the legislation.