NRF Speaks Out on Bill to Block Sales Tax Fairness

Bill that exempts businesses without physical presence ‘out of step’ with “modern digital economy.”

The National Retail Federation (NRF) has voiced its opposition to legislation introduced by Representative Jim Sensenbrenner, R-Wis., that would codify a 1992 Supreme Court ruling that out-of-state sellers can be required to collect sales tax only if they have a physical presence such as a store, warehouse or office in the buyer’s state.

“Retailers are concerned that this plan would codify a quarter-century-old court ruling to govern 21st century digital commerce,” NRF Senior Vice President of Government Relations David French said. “This effort ignores evolving marketplace realities and is out of step with the modern digital economy.”

Various bills that would effectively overturn the Supreme Court ruling have been introduced in Congress over the past 15 years but none have won final passage. In the past two years, several states have passed or considered legislation requiring collection nonetheless, with some acknowledging that the ruling leaves them without authority to do so but saying they want to prompt Congress to act or the Supreme Court to reconsider the issue. States and local governments lose close to $25 billion a year because of untaxed online sales.

In 2015, Justice Anthony Kennedy said the court made a mistake in 1992 by relying on an out-of-date precedent on physical presence. His comments came as the justices allowed a lawsuit to go forward against a Colorado law that stopped short of requiring collection by sellers but required them to report untaxed purchases so the state can collect directly from consumers. Kennedy said the Colorado lawsuit, which was eventually allowed to stand, wasn’t broad enough to reconsider the 1992 ruling, but invited online sales tax supporters to find another case that might allow the court to correct itself.

More recently, 11 states asked the court in November 2016 to reconsider the 1992 ruling.

NRF supports two bills introduced this Congress that would require online sellers to collect sales tax the same as local stores. Senator Michael Enzi, R-Wyo., reintroduced the Marketplace Fairness Act, legislation that passed the Senate in 2013 but never received a vote in the House. Representative Kristi Noem, R-S.D., reintroduced a House version that had also been delayed in previous Congresses, the Remote Transactions Parity Act.

The two measures vary in details but both would allow states to require out-of-state sellers to collect sales tax regardless of whether they have a physical presence in a customer’s state.

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