Symbolic Senate Vote Demonstrates Support For Marketplace Fairness Act

There have been multiple attempts in recent years to push through some sort of federal law that would allow for state governments to collect sales tax on residents’ online purchases, but none have made it very far. However, a Senate vote this afternoon shows their might be some life in the latest iteration of the Marketplace Fairness Act.

Today’s vote was not on the Act itself, which was introduced last month in both the House and Senate, but instead is an amendment [PDF] to the 2014 Budget Resolution, intended by Act sponsor Sen. Mike Enzi of Wyoming to demonstrate that there is bipartisan support for the legislation.

The amendment is one of numerous budget amendments being put before the Senate and passed late Friday afternoon by a vote of 75 to 24. If that number maintains through the voting process on the actual Act, it means that opponents would not have the numbers to force a filibuster. However, it is worth noting that today’s vote does not bind the senators to voting the same way if and when the Act comes up for debate.

Not surprisingly, industry groups representing bricks-and-mortar retailers are thrilled by today’s vote.

“Today’s Senate vote is a clear victory for Main Street retailers and those who believe in free and fair competition,” said Retail Industry Leaders Association President Sandy Kennedy, who called the results “proof-positive that the federal government’s special treatment of online-only retailers will soon be a thing of the past.”

On the flip side of the argument is WE R HERE (which stands for Web Enabled Retailers Helping Expand Retail Employment), a coalition of smaller online businesses that believe the Act puts them in an unfair position of having to suddenly calculate, collect and disburse sales taxes to authorities around the country. The Act does include an exemption for businesses making under $1 million in sales per year, but WE R HERE and others argue that this is still too low a threshold.

“Amendments like this are thinly veiled attempts to benefit big-box multinational corporations while persecuting their small competitors,” reads a statement from the group. “Senators need to understand that $1 million in sales translates to less than $100,000 in business income – enough to support only a few employees. Indeed, this legislation seems designed to help big retailers like Amazon.com and Walmart eliminate their much smaller competition.”

Currently, states are only allowed to collect sales tax on online purchases if the seller has a physical presence in the state. This has led to much debate and discussion about what constitutes a physical presence.

A number of states have successfully argued that having any office or warehouse in the state meets that standard. Others have claimed that affiliate programs, which allow third-party sellers to use sites like Amazon as a storefront for their online businesses, are tantamount to having a physical presence. Georgia recently enacted a law that expanded this definition to include ads placed on Georgia-based websites.

The Marketplace Fairness Act would not require sales to collect sales tax from online businesses. Instead, it would allow states to decide whether or not they want to compel businesses to collect tax. So residents of states where there are no sales tax would still enjoy tax-free purchasing.