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Another Taxing Question ..... And Task?

Here is another great piece from Money Education .

The Senate just voted on and passed The Marketplace Fairness Act. What is the Marketplace Fairness Act?

The Marketplace Fairness Act grants states the authority to compel online and catalog retailers ("remote sellers"), no matter where they are located, to collect sales tax at the time of a transaction - exactly like local retailers are already required to do. However, there is a caveat: States are only granted this authority after they have simplified their sales tax laws.

History:

The 1967 Supreme Court case National Bellas Hess v. Illinois Department of Revenue set the stage for the debate on taxing internet sales when, in its majority (5 to 4) opinion, the court ruled that:

"the many variations in rates of tax, in allowable exemptions, and in administrative and record-keeping requirements could entangle [the company]'s interstate business in a virtual welter of complicated obligations to local jurisdictions" (emphasis added).

In 1992, the matter of sales tax on remote sales came before the high court again in Quill v. North Dakota. This time, the court reaffirmed the earlier Bellas Hess decision (8 to 1), primarily on the basis of stare decisis ("to stand by decision," a doctrine that requires the court to respect the precedent set by prior rulings). The ruling went on to state,

"[O]ur decision is made easier by the fact that the underlying issue is not only one that Congress may be better qualified to resolve, but also one that Congress has the ultimate power to resolve. No matter how we evaluate the burdens that use taxes impose on interstate commerce, Congress remains free to disagree with our conclusions" (emphasis added).

Exemption and requirements:

There is an exemption for retailers with less than $1 million in sales and states are obligated to simplify their sales tax laws.

Money Education Comment:

On the face of it, the proposal appears to strive for "fairness," as implied in the law's name. However, we are skeptical that Congress and the states will simplify the process such that small businesses are not further burdened with compliance. While the $1 million limit might appear to be high, it is unlikely that retailers of that size have margins significantly high so as to be able to hire an additional person for state sales tax compliance. As with all proposals, time will tell. Fortunately for small businesses, the bill faces opposition in the House.

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