By a vote of 69 to 27, the U.S. Senate on May 6 passed the Marketplace Fairness Act (“MFA”). The MFA would authorize states and other taxing jurisdictions that meet minimal tax simplification requirements to impose a sales/use tax collection obligation on Internet retailers and other remote sellers. The final version of the bill expanded the original scope of the authorization to include tribal organizations, in addition to states, US territories, and the District of Columbia. No additional simplification measures were added by the Senate, leaving a bill that does not require genuine reform of state and local sales and use tax systems. Nor did the Senate raise the threshold for the small seller exemption above $1 million in total US sales, leaving small businesses vulnerable to costly and burdensome compliance and tax administration requirements. As any business put through the rigors of even a single state’s audit process knows, the specter of more than 45 audits each year can be enough to cripple a smaller Internet or catalog vendor.
The MFA now moves to the House of Representatives, where the prospects for passage are less certain. Some Republican representatives have voiced support for the bill, however. Ecommerce sellers interested in the bill should contact their representatives to make their voices heard, before the bill becomes law. We will continue to update our readers on developments concerning the MFA.