Retailers welcome Congress’ renewed online sales tax push

Gavel and flag in courtroom
A 1992 U.S. Supreme Court ruling says out-of-state sellers can only collect sales tax if they have a physical presence in the state where the consumer is purchasing. 

The National Retail Federation (NRF) was happy to announce renewed efforts by Congress to require that online sellers collect sales tax just as local stores do. 

It’s estimated that states and local governments lose close to $25 billion a year because of untaxed online sales. 

“Online sellers who aren’t required to collect sales tax hold an unfair price advantage over local merchants who do have to collect,” a spokesperson from NRF told FierceRetail. 

Reintroduced yesterday by Senator Michael Enzi, R-Wyo., the Marketplace Fairness Act was originally passed by the Senate in 2013 but never was voted upon in the House. At the same time, a similar bill, the Remote Transactions Parity Act, was reintroduced in the House by Kristi Noem, R-S.D. 

Both bills would allow states to require out-of-state sellers to collect state tax even if they do not have a physical presence in a customer’s state. Currently standing in their way is a 1992 U.S. Supreme Court ruling that says out-of-state sellers can only collect sales tax if they have a store, warehouse or office in the state where the consumer is purchasing. 

Despite the ruling, several states have passed legislation requiring tax collection, but they often lack the authority to do so due to the Supreme Court ruling. 

“The Supreme Court has made it clear that states simply do not have the authority over out-of-state sellers unless they have a physical presence,” the NRF spokesperson said. “The states can pass all the laws they want, but they are not really enforceable unless Congress passes a law authorizing them to do so or the Supreme Court issues a new ruling.” 

Last year, 11 states asked the court to reconsider the 1992 ruling. In 2015, Justice Anthony Kennedy said the ruling was a mistake made on an out-of-date precedent.

“With more states passing sales tax laws or going to court, pressure is building on Congress to finally address this issue,” NRF Senior Vice President for Government Affairs David French said. “The states know they can’t fix this on their own, but they agree with retailers that Congress has stalled for far too long. Online sellers should not continue to receive an unfair price advantage.”