Back in early May 2013, the US Senate voted to pass the Marketplace Fairness Act, inching it closer to its implementation and enforcement. The bill aims to level the playing field between ecommerce fronts and brick and mortar stores by making purchases from both taxable. Brick and mortar stores already collect sales tax based on local tax code rates and pretty much just serve the immediate community around them. On the other hand, ecommerce sites work across the entire country and currently just collect tax for in-state customers (in-state defined as an ecommerce store having a physical address in the same state). If the act is passed, state governments should see over $10 billion in tax revenue from online sales. The bill is still technically up in the air, as the House of Representatives hasn’t voted on it and President Barrack Obama has yet to sign it into law, but he has shown strong support for it. Here’s what you need to know about this piece of legislation.
A Brief History of Taxation and Online Sales
Back in 1992, the Supreme Court case Quill Corp. v. North Dakota resulted in a ruling that required a business to have a physical presence in a state for the state to collect taxes from it. Quill Corporation, headquartered in Illinois, is an office supply retailer that offered North Dakota residents a service that allowed them to purchase items remotely from the Quill Corporation store. North Dakota wanted to tax all purchases made through this, but the Supreme Court sided with the business and struck down the state’s attempt. Continue reading The Marketplace Fairness Act and You