Sales Tax Fairness
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ABA firmly believes it is the responsibility of state leaders to uniformly and fairly enforce sales tax laws by requiring all retailers—whether they operate online, in bricks-and-mortar stores, or a combination of both—to fulfill their obligation to collect sales tax.
This is neither a new tax nor special treatment for independent bookstores—it is an equitable and uniform enforcement of existing state tax laws.
Locally owned businesses have far greater positive economic impact on their communities and are largely responsible for our communities retaining their unique characteristics. To undercut them, by selectively deciding what laws to enforce and what laws to ignore, is simply wrong.
What is Sales Tax Fairness? (Also called E-Fairness)
E-Fairness, or sales tax fairness, calls for the equitable enforcement of existing state tax laws. Currently, bricks-and-mortar retailers are required to collect and remit sales tax on customer purchases, while in many states, remote retailers are allowed to skirt their obligation to collect sales tax on behalf of the state. This places in-state retailers at a severe competitive disadvantage and has prompted a growing number of consumers to purchase online to avoid paying sales tax.
Tax laws in the 45 states that collect sales tax stipulate that when a retailer has any physical presence in the state, whether it is a retail store, warehouse, office, or sales agent, the company must collect and remit sales tax on purchases made by customers in those states. (Five states -- Alaska, Delaware, Montana, New Hampshire, and Oregon -- don't collect sales tax.)
The E-Fairness Map here shows that the number of states tackling e-fairness on their own continues to grow. Out of the 45 states that collect sales tax, 33 have taken action to recoup lost sales tax revenue (by passing a law and/or striking a deal with Amazon.com to collect in exchange for opening a facility), while 19 of those states have passed some form of sales tax fairness law. Click here to see the map!
E-Fairness Action Kit Offers State-Specific Tools
At present, two federal sales tax fairness bills have strong and growing bipartisan support in Washington, D.C.: the Marketplace Equity Act (MEA) in the U.S. House of Representatives and the Marketplace Fairness Act (MFA) in the U.S. Senate.
Both bills would give states the right – if they choose – to require remote retailers to collect and remit sales tax to the state. Importantly, the laws have small business exemptions. In MFA, if a retailer does $500K or more in remote sales annually, the retailer will be required to collect and remit; in MEA, the minimum is $1 million.
In addition, state legislative bodies continue to seek ways to compel remote retailers to follow existing sales tax laws by requiring them to collect and remit sales tax for orders made by customers in their state. Thus far, with the invaluable outreach of booksellers leading the charge, ABA with its coalition of independent trade associations has won sales tax fairness in a number of states, including states such as Arkansas, California, Connecticut, Georgia, New York, North Carolina, Rhode Island, Texas, and Utah.
With so much momentum toward sales tax fairness, it is crucial that booksellers and their retailing neighbors get involved at the grass roots level. To make this outreach easier, ABA has created an E-Fairness Action Kit that provides booksellers with crucial tools, many of which are state-specific, to help them in their e-fairness outreach efforts. E-mails, letters, phone calls, and visits with state and federal legislators (at their local district offices) have made a world of difference in bringing this important issue to the attention of elected officials.
If you feel strongly about this issue, we urge you to take action and contact your legislator now. Let us know what their take on this issue is.
Join ABA's Fight for E-Fairness!
Sales Tax Fairness Fact Check: Opponents of sales tax fairness are doing their best to spread misinformation about the Marketplace Fairness Act in the hopes that the U.S. House of Representatives will refuse to consider the bill. This Fact Check corrects the public record and is a good resource to refute opposition spin with your lawmakers or with the press.
Since 2008, with the passage of the first sales tax fairness legislation in New York, there are have been many state-wide victories, in states such as Arkansas, California, Connecticut, North Carolina, Rhode Island, South Dakota, and Utah, just to name a few. Now, ABA’s focus has turned to the Washington, D.C., where a federal solution has perhaps its best chance to pass before the congressional session ends in December 2012.
Crucial to past successes in the sales tax equity fight has been the passionate and engaged advocacy of booksellers and other independent retailers. E-mails, letters, phone calls, and visits with state and federal legislators have made all the difference in bringing this important issue to the attention of elected officials.
To help booksellers advocate on behalf of the federal legislation, the E-Fairness Action Kit (E-FACT) provides booksellers with a wide array of state-specific tools to help them in their e-fairness outreach efforts. The e-fairness victories already achieved are establishing an important precedent that is now prompting the U.S. Congress to act. Consider adapting some of the templates in the E-FACT materials to raise the issue with your governor or your U.S. Senators and Representatives -- and help secure a level playing field for all retailers.
The Alliance for Main Street Fairness: ABA is a member of the Alliance for Main Street Fairness, a diverse coalition of business owners and concerned citizens who want to bring sales tax laws up-to-date and level the playing field so all businesses can compete fairly.
Streamlined Sales Tax Governing Board: The Board assists states that are members of the Streamlined Sales and Use Tax Agreement, as they administer a simpler and more uniform sales and use tax systems. The Senate bill, the Marketplace Fairness Act, provides authority to the Streamlined Sales and Use Tax Agreement, so those states may pass legislation to require remote retailers to collect and remit sales tax.
ABA is a member of the Marketplace Fairness Coalition, which supports federal legislation that empowers states to update their sales and use tax laws to level the playing field for all sellers. The Coalition is comprised of businesses of every size, sector and channel of product distribution, located in every state throughout the country. The Coalition beleives that the time has come for Congress to give businesses clarity and certainty by allowing states to update their laws to reflect the 21st Century marketplace.
Does "e-fairness" call for new taxes?
No -- this is in no way an issue of a “new tax.” A customer making a purchase where sales tax is not collected still owes a “use tax.” Customers are required to pay this to the state, but only a small percentage of consumers actually do so. In reality, this is an issue of which party collects the tax, the retailer or the buyer. It is always easier and more efficient to collect sales tax at the point of sale, as use tax laws are very hard to enforce. However, in the absence of a sales tax fairness solution to level the playing field, a growing number of states are stepping up the enforcement of use tax laws, putting the onus on the customer to remit to the state or face a stressful audit. This is even more of an issue when one considers that many residents do not even know they owe a use tax and see the Internet as a type of “duty-free” shopping. All told, the end result is that in-state retailers lose business and the states lose much-needed tax revenue. Enforcing the sales tax law by requiring out-of-state online retailers to collect sales tax would bring about "e-fairness."
Why don’t states ask online retailers to collect the tax?
Many online retailers will point to a 1992 Supreme Court judgment, Quill Corp. v. North Dakota, to justify why they are not collecting sales tax in states where they believe they do not have a physical presence. The Quill decision states that it would be too burdensome for a company to collect sales tax in every state due to the complexity of various state and local sales tax systems. However, the past decade has seen an incredible evolution in technology, and today there are myriad software solutions that will allow all sizes of businesses to collect and remit in states.
Does ABA believe the federal government needs to pass the Sales Tax Fairness and Simplification Act in order to collect sales tax?
Though ABA supports sales tax fairness efforts at the state level, it has always stated its preference for a federal solution to the issue. Currently, there are two similar federal bills, the Marketplace Equity Act (H.R. 3179) in the U.S. House of Representatives, and the Marketplace Fairness Act (S.1832) in the Senate, that have tremendous momentum. These bills would give states the right – if they choose to do so – to require remote retailers to collect and remit sales tax in the state. Importantly both bills have small seller exemptions: In the Senate bill, a remote retailer with less than $500,000 in gross remote sales annually would be exempted, and in the House bill retailers with less than $1 million would be exempted. The Senate version of the bill also authorizes the Streamlined Sales and Use Tax Agreement.
What is the Streamlined Sales Tax Project?
The Streamlined Sales Tax Project (SSTP) is an effort created by state governments, with input from local governments and the private sector, to simplify and modernize sales and use tax collection and administration, making it much easier for online retailers to collect sales tax. Retailer participation in SSTP is voluntary, but as of mid-2012, some 1,000 businesses in the 21 participating states have agreed to collect sales tax on remote sales. A brief summary of the project can be downloaded at http://www.streamlinedsalestax.org/execsum0105.pdf. Currently, 24 states are members of the SSTP.
So what is the "Streamlined Sales and Use Tax Agreement"?
The Streamlined Sales and Use Tax Agreement (SSUTA) is the official agreement made by states that are participating in SSTP. ABA supports SSUTA.
Isn't this call for online sales tax very unpopular with consumers?
For those consumers who believe this is a new tax, it is indeed unpopular, which is why education is such a key component to this advocacy effort. But dedicated bookseller advocacy – including op-ed pieces and Letters to the Editor – and the efforts of a wide range of trade associations, have resulted in a growing number of consumers understanding the issue much better.
Many consumers now see that, when states allow out-of-state businesses to pirate away dollars that normally would have been spent in-state, they are doing nothing less than helping to encumber their state's own economy. In the end, the state's citizens end up the big losers. Uncollected sales tax revenue translates into a funding shortfall for such essential services as schools and first responders. It is conceivable that some states and local jurisdictions will try to make up for that lost revenue by increasing property or school taxes, or both. The bottom line is that states will need to get the money from somewhere. Given the choice between another drastic property tax increase, or having online retailers follow the law and collect sales tax, most consumers would choose the latter.
What can booksellers do to help?
Write your U.S. Senators and Representatives and your state governor and let them know that you support the sales tax fairness bills currently under consideration in congress. ABA has created the “E-Fairness Action Kit (E-FACT)” to make this outreach easier.
Who can I talk to if I have further questions?
Please contact ABA Senior Public Policy Analyst David Grogan at 914-406-7562 or via e-mail at email@example.com.