Restoring the sovereign rights of states to enforce existing state and local sales and use tax laws is the stated goal of legislation introduced Feb. 14 in both houses of Congress.
The Senate version of the Marketplace Fairness Act of 2013, S. 336, was introduced by Sen. Michael B. Enzi, R-Wy., and the House version, H.R. 684, was introduced by Rep. Steve Womack, R-Ark.
The legislation, if approved by both houses of Congress and signed into law by President Obama, would essentially allow states to require businesses, including numismatic firms, to collect all sales taxes on most purchases including those purchased through dealer websites.
Currently, sales taxes are governed by a network of state and local laws. Customers who buy online from out-of-state merchants generally do not pay sales taxes while customers making over-the-counter purchases or online purchases within the merchant’s state are charged state and local sales taxes.
“The Marketplace Fairness Act is an effort to delegate federal powers under the Commerce Clause to the States by creating as a ‘nexus’ the internet presence,” said Jimmy Hayes, a former member of the U.S. House of Representatives who is now legislative consultant to the hobby trade association Industry Council for Tangible Assets.
Hayes said he is certain that the sponsors of the legislation “are confident that the language meets Constitutional requirements, and I am equally certain that those who disagree will work diligently to initiate a court test.”
Hayes said the 1992 U.S. Supreme Court decision in Quill v. North Dakota ruled that retailers (in the Quill case, a catalog mail-order company) are exempt from collecting sales taxes in states where the retailer has no physical presence.
“Many things have changed since the 1992 decision, not the least of which is the growing list of cases holding that various activities by national retailers did in fact establish a ‘nexus’ within a state,” Hayes said. “Nevertheless, the specific issue of ‘internet as nexus’ has never been before the court.”
Both bills represent a consolidation of similar bills introduced in 2011, all of which died for lack of action before the close of the 112th Congress in December 2012.
Currently, retailers rely on customers who purchase items online to remit sales taxes voluntarily if so required in the states the customers reside in.
Both bills would give the states the right to collect sales and use taxes two ways — as members of the Streamlined Sales and Use Tax Agreement or, if not members of SSUTA, to adopt minimum simplification requirements.
Both bills mandate that software is to be provided free to businesses to simplify collection and remittance of sales tax to all states. An exemption would be granted for smaller businesses — those having gross annual receipts in remote sales of less than $1 million.
The term “state” in the legislation means “each of the several states, the District of Columbia, the Commonwealth of Puerto Rico, Guam, American Samoa, the United States Virgin Islands, the Commonwealth of the Northern Mariana Islands, and any other territory or possession of the United States.”
ICTA warns members
The introduction of the two bills has led ICTA to urge collectors and dealers in states that currently have sales tax exemptions on coins and precious metals products to monitor their state legislatures for any attempts to repeal the state exemptions.
“Many states are reviewing all of their state sales tax exemptions in an effort to raise revenues, which puts all exemptions at risk. Each state will decide which sales tax exemptions to retain, if any; however, no state will be required to keep an existing exemption of any kind, including those for coin and precious metals products. “There is considerable bi-partisan support — by both members of Congress and state governors — to enact this new legislation requiring collection of sales taxes across state lines,” according to an ICTA news release.
Opposition and support
The International Council of Shopping Centers supports passage of the legislation, saying in a news release that since the topic “is a matter of interstate commerce, Congress must grant the authority needed for states to enforce sales tax collection and re-mittance from out-of-state sellers.”
The National Retail Federation also supports the legislation, stating, “While store owners collect and remit state and local sales taxes their digital competitors are off the hook — and benefiting because of it,” according to a news release. NRF represents retailers of all types and sizes, including chain restaurants and industry partners, from the United States and more than 45 other countries.
In contrast, the National Taxpayers Union opposes the bill, with officials saying taxpayers, businesses and the economy will suffer if the legislation becomes law, according to an NTU news release.
In an NTU news release, Pete Sepp, executive vice president of the 362,000-member organization, said, “If Congress wants a constructive role in this tax policy debate, it should consider the grave consequences of MFA as well as examine other options.”
The Direct Marketing Association also issued a statement expressing disappointment with the introduction of legislation.
“DMA believes that Congress should reject this effort and instead seek real efficiency and harmonization among state taxing regimes in order to achieve a truly streamlined system of sales tax collection. Simplification — this is not,” according to the news release. DMA is the world’s largest trade association dedicated to advancing and protecting responsible data-driven marketing.
The House bill was referred to the House Committee on the Judiciary and the Senate legislation was sent to Senate Committee on Finance. ■