The MFA: Online Sales Tax One Year Later

May 6, 2014, was the one year anniversary of the Marketplace Fairness Act’s passage in the Senate. Since that time, the House has had the bill and has been working on creating a version of the MFA that House Representatives find acceptable. Lead by Representative Goodlatte, the Chairman of the House Judiciary Committee, they’ve been working on a new bill that meet his criteria for a “better” online sales tax bill.

The last real movement we saw on this bill was in January. So a year later, where are we headed?  Representative Steve Womack of Arkansas has been hard at work drafting a new online sales tax bill that meets Goodlatte’s requirements and reduces the burden of online sales tax for sellers. Last Tuesday, Womack said that things need to move forward on the sales tax bill: “Without House action, the problem isn’t going to go away, and our Main Streets simply cannot afford to wait any longer.” So what can we expect? While politics is always a toss up, especially in election years, this bill has been stalled pretty significantly in the House Judiciary Committee. Part of the problem is that the Senate MFA bill hasn’t been widely accepted by many in the sales tax professional community as a good bill, and small businesses are pushing back.

The existing bill’s problems might have tainted the idea of a national online sales tax enough that passing a revised bill, no matter how much better, isn’t going to be possible in an election year. Womack also noted that the last year has been spent educating legislators that a national sales tax bill isn’t a “new tax” but rather “closing a loophole.” Part of the issue is that while use tax is due for online purchases, most taxpayers are unaware of or ignore that requirement. Making online merchants collect sales tax is essentially forcing residents to pay a tax they didn’t pay before but should have–which can easily be seen by voters as a new tax. Congress does some pretty unpredictable things, though, and there’s always the possibility that things could change. With primaries just around the corner, things will shake out a bit more once elections heat up.

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