In every Congress since 2000 legislation has been introduced to allow states to tax remote sales they can’t currently tax. This Congress is no different with the introduction of the Marketplace Fairness Act of 2015 that is similar but not identical to the 2013 legislation of the same name. Whereas the 2013 legislation emphasized giving businesses a level playing field, legislators describe the 2015 proposal as giving states the right to enforce their own laws regarding sales tax rather than turning to Congress.
What is different this Congress is the likely debate of alternatives to the traditional approach. It is expected there will be at least two other approaches, including one that is similar to MFA and one that is quite different. The version that is different is known as hybrid origin sourcing. This concept turns traditional sales tax on its head by requiring Internet sellers to collect sales tax based on their location instead of their customer’s location.
The bottom line is Internet sales tax is back on the table‑and more companies than Amazon are sitting up and paying attention. Once again, those states poised to exercise the Internet sales tax are those already meeting the requirements laid out in the proposal, particularly the 23 states that are part of the Streamlined Sales Tax Agreement.
The following map indicates the status of each state and the potential for implementing this federal mandate should it pass both houses:
Once again, if the bill becomes law, all states will have the option to require remote sellers to collect sales tax. However, a state’s current sales tax code, including whether it belongs to Streamlined Sales Tax, determines how soon it could do so.
To read the proposal, go here.