CSG Advocates for States to Have Ability to Collect Online Sales Taxes

With Congress considering bipartisan legislation to allow states to enforce online sales tax collection, state leaders participating in The Council of State Governments’ National Leadership Conference in La Quinta, Calif., discussed this critical issue May 19.

The Marketplace Fairness Act, introduced in November 2011, is designed to enable states to apply and enforce their existing sales and use tax laws equally, whether a transaction takes place at the mom-and-pop store down the street or an online-only marketplace. Specifically, it authorizes states to require all sellers to collect and remit sales and use taxes for remote sales under two conditions: if a state belongs to the Streamlined Sales and Use Tax Agreement, or if a state enacts its own tax simplification system meeting certain minimum standards for ease of collection.

In either case, small sellers—those with remote sales of less than $500,000 per year—are exempt from the collection requirement. The bill was introduced by Sen. Mike Enzi of Wyoming and has attracted 12 additional co-sponsors from both sides of the aisle. Similar legislation in the House has attracted a bipartisan group of 39 sponsors.

Washington state Rep. Ross Hunter, a member of the Streamlined Sales Tax Governing Board, spoke in favor of the legislation in La Quinta. Hunter emphasized that the legislation “would not raise taxes, just do a better job of collecting them.”

Another member of the Streamlined Sales Tax Board, Indiana state Sen. Luke Kenley, agreed. He said that by not collecting online sales tax, states were in effect putting smaller businesses at a competitive disadvantage.

CSG’s Executive Committee passed a resolution supporting efforts of Congress to regulate e-commerce through legislation that allows states to enforce their existing sales and use tax laws, regardless of the method of transaction, and to collect taxes under state law. The resolution could end up being timely, as the 112th Congress enters the final legislative stretch before the November elections.