Durbin and Senators Introduce Bipartisan Bill to Level the Playing Field for Illinois Retailers
[WASHINGTON, D.C.] – U.S. Senator Dick Durbin (D-IL), Mike Enzi (R-WY), Lamar Alexander (R-TN) and a bipartisan group of seven other Senators today introduced legislation to allow local brick-and-mortar retailers to compete more effectively against out-of-state internet sellers. The Marketplace Fairness Act would give states the option to collect sales tax already owed under current law from out-of-state businesses, rather than rely on consumers to pay those taxes to the states—the method of tax collection to which they are now restricted.
“Most small businesses in Illinois don’t want a government handout. They don’t want special treatment. They just want to be able to compete fairly,” said Durbin. “That’s why I’ve been working with Senators Enzi and Alexander to introduce the Marketplace Fairness Act – a bipartisan bill to level the playing field for local main street businesses.”
The Marketplace Fairness Act is similar to legislation Durbin introduced in August known as the Main Street Fairness Act. Today’s new bipartisan legislation comes from months of negotiations between Democrats and Republicans over how best to close a current tax loophole that requires brick-and-mortar retailers to collect sales taxes from customers who make purchases in their stores, while allowing many online and catalog retailers to avoid collecting the same taxes. Under the Marketplace Fairness Act, states would have the option to collect sales and use tax revenues from out-of-state sellers through a new, simplified tax system.
“States and localities across the country lose billions of dollars in uncollected tax revenue each year. At the same time, states are under increasing pressure to balance their budgets,” said Durbin. “From 2005 to 2010 the state of Illinois estimated it lost $183 million each year. The Main Street Fairness Act doesn’t ask anyone to pay a single penny more in taxes. Instead, it would help governors and mayors collect taxes that are already owed.”
The Marketplace Fairness Act would not require a single penny in additional taxes to be paid that are not already owed. Instead, the legislation would:
- Provides states the authority to enforce their existing laws, if they choose to do so, by adopting one of the following options:
- Streamlined Sales and Use Tax Agreement: The legislation allows any state that is a member of the SSUTA to require remote retailers to collect state and local sales and use taxes.
- Alternative Minimum Simplification Requirements: States that are not SSUTA members may require remote retailers to collect state and local sales and use taxes if they adopt minimum simplification requirements.
- Prohibits states from requiring remote sellers with less than $500,000 in annual remote nationwide sales to collect state and local sales and use taxes.
- Requires states under the Alternative Minimum Simplification Requirements to provide software and services to remote sellers and third-party providers. This will ensure remote sellers have software and service options, increase competition among providers and ease the administrative burden on states.
- Limits the authority under the Alternative Minimum Simplification Requirements to the collection of sales and use taxes. States may not subject sellers to other forms or taxes, registration, licensing or regulatory requirements.
Under a Supreme Court ruling, known as the Quill decision, retailers are only required to collect sales tax in states where they also have brick-and-mortar stores. The burden falls to consumers who are required to report to state tax departments any sales taxes they owe for online purchases. As a result, local retailers are at a competitive disadvantage because they must collect sales taxes at the point of sale while out of state retailers, including many large online and catalog retailers, in effect give their customers a discount by collecting no state or local sales taxes. And, consumers are left with the responsibility of reporting the sales taxes owed on online purchases on their tax returns.
As a result, 45 states and the District of Columbia responded to the Quill decision by working with local governments and the business community to adopt a comprehensive interstate system to harmonize and simplify their sales tax rules and administrative requirements called the Streamlined Sales and Use Tax Agreement. To date, 24 states have changed their laws to comply with this interstate agreement. But the Quill decision made it clear Congress would need to authorize and sanction such an agreement. The Marketplace Fairness Act does that while providing assistance for online retailers and small businesses to implement the requirements
The Marketplace Fairness Act is supported by the National Governors’ Association, National Conference on State Legislatures, National Conference of Mayors, National League of Cities, National Association of Counties, Governing Board of the Streamlined Sales and Use Tax Agreement, International Council of Shopping Centers, Retail Industry Leaders Association, Amazon, Performance Marketing Association, American Booksellers Association, National Association of College Stores, National Association of Real Estate Investment Trusts and Outdoor Industry Association.
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