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New Bill Could End Sales Tax Fairness Fight

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Lawmakers say a new sales tax fairness bill introduced in Congress is the version that will finally give retailers victory in their long-running battle to require online merchants to collect sales tax the same as bricks-and-mortar stores.

“For over a decade, congressional inaction has created one of the largest tax loopholes of our lifetime,” Sen. Michael Enzi (R-Wyo.), lead Senate sponsor of the Marketplace Fairness Act of 2013, said in a press release announcing the bill. “It’s time to stop discriminating through the tax code and put local and Main Street retailers on a level playing field with their out-of-state and online counterparts.”

In the same release, House sponsor Rep. Steve Womack (R-Ark.) called the bill a “bipartisan, bicameral, common-sense solution that promotes states’ rights and levels the playing field for Main Street businesses rather than continuing to allow the government to pick marketplace winners and losers.”

NRF senior vice president for government relations David French says the measure is “flexible enough for states to implement and easy enough for small businesses to comply with.”

Unlike competing sales tax fairness measures that split support in the past, identical versions of the new bill have been introduced in both the House and Senate, and the legislation has more than 50 co-sponsors from both sides of the political aisle. Sales tax bills have been introduced in each session of Congress since at least 2002, but early versions were criticized for requiring states to make too many changes and creating burdens for small businesses. As recently as last year, three versions were competing in the House and Senate.

States that want to require online sellers to collect sales tax would still have to simplify their tax codes. But participation would be voluntary, and the new version gives them a choice of either a comprehensive simplification plan proposed in the past or an easier alternative set of requirements. Small businesses with less than $1 million in annual sales would be exempt from collecting tax (up from $500,000 in past versions), and states, rather than retailers, would pay for the software that would handle collection.