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Main Street Fairness Act. Is SST the Silver Bullet?

author photo of Sylvia F. Dion

On July 29, 2011, Congressional Democrats in both the U.S. Senate and House of Representatives introduced “internet sales tax” legislation. In the Senate, S. 1452 was introduced by Senator Richard Durbin (Illinois). A companion bill, H.R. 2701 was introduced in the House by Representative John Conyers (Michigan). Both bills are referred to by the same title, the “Main Street Fairness Act”.

By now you’ve heard about the latest Federal “Main Street Fairness” legislation, as reporters, commentators, industry groups, on-line retailers, bloggers, and just about everyone else has an opinion on it. This isn’t surprising as a major focus of the Main Street Fairness Act is the hotly debated issue of internet sales taxes. But this isn’t a new debate! The issue of whether sales made over the internet should be subject to a sales tax collection requirement has been widely discussed for at least a decade now, and this isn’t the first time similar legislation has been introduced. Just over a year ago – on July 1, 2010 – similar legislation was introduced by former House Representative, William Delahunt (H.R. 5660 - also titled the “Main Street Fairness Act”).

Proponents of internet sales tax legislation include brick-and-mortar retailers whose “physical presence” in their state requires them to charge sales tax, and who argue, therefore, that this puts them at a disadvantage against certain on-line retailers who are able to sell the same merchandise to the same customers “tax-free”. (But these sales aren't "tax-free" at all, as customers may still owe a use tax.) Also in support are the state and local governments who lose billions in state revenue dollars each year to uncollected use taxes. On the other side, on-line retailers have argued for years, that a 1992 U.S. Supreme Court decision, Quill Corp. v. North Dakota, does not require them to charge tax on sales to customers in states in which they lack a physical presence. (For more on Quill, see my recent STS postAmazon Laws: The New Normal? Internet Sales Tax Law Updateand fellow blogger John Daly’s recent post,Main Street Fairness?”) On-line retailers and other opponents have also maintained that imposing a sales tax collection responsibility creates a disproportionate administrative burden, especially on small on-line retailers who would need to navigate a complex system of tax rates in order to properly collect sales tax from customers located in thousands of different jurisdictions.

While much of the media’s coverage has centered on this long brewing debate, most news stories have glossed over the specifics of the proposed legislation, while others have presented potentially misleading information, such as equating the proposed legislation to a national, across-the-board, sales tax, which it isn’t. So, to clarify some of these issues, here’s more on the proposed legislation.

Summary of S. 1452 and H.R. 2701, the “Main Street” Legislation

Because both S. 1452 and H.R. 2701 read identically, I’ll refer to both bills collectively as the “Main Street” legislation. This legislation states that its purpose is “to promote simplification and fairness in the administration and collection of sales and use taxes”, and is based on several key findings including that sales transactions should be taxed equally, as a matter of economic policy and basic fairness, regardless of how they are transacted; that Congress has the power to facilitate equal taxation based on Quill; and that states that voluntarily and adequately simplify their tax systems should have the authority to require sellers to collect sales tax regardless of where the seller is located.

The Main Street legislation gives Streamlined Sales and Use Tax Agreement (“SSUTA”) full-member states the authority to require sellers (other than those who qualify for the small seller exception) to charge and remit sales tax on sales to customers in those member states provided certain required national thresholds, specific operational aspects and minimal simplification requirements are met. (These specific requirements and actions are detailed in Sec. 4. of S. 1452 and H.R. 2701)

Although the legislation doesn’t define or explain the small seller exception, Cory Barwick, Lead Tax Analyst with CCH-a Wolters Kluwer Business, and's Streamlined Sales Tax blogger, explains that the SSUTA’s small seller exception “allows businesses with less than $500,000 in revenue per year to be exempt from the remote seller requirements”. According to Barwick, “the Streamlined Sales Tax Governing Board has made many revisions to the Streamlined Sales and Use Tax Agreement since its inception in an effort to entice states to become members to the agreement, including the November 2010 update to the small seller exception”, which he adds, “makes sense as these businesses are the ones that generally cannot afford the expense associated with the collection of remote taxes.”

In a nutshell, if Main Street legislation passes, only full-member SSUTA states will have the legal right to impose a sales tax collection requirement on remote sellers who do not qualify for the small seller exception. As of August 1, 2011, full-member SSUTA members states include; Arkansas, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Oklahoma, Rhode Island, South Dakota, Vermont, Washington, West Virginia, Wisconsin, Wyoming, and effective this month, Georgia.

Clarifying the “Internet Sales Tax Loophole”

Many news stories talk about closing the “internet sales tax loophole” with some boldly screaming that the internet is no longer in its infancy nor in need of “protection”. These stories give the impression that this "protection" is the reason internet sales aren’t subject to a sales tax collection requirement. I know this impression exists because I'm also often asked a question which goes something like this, “Isn’t there some type of internet law that prevents internet sales from being subject to sales tax?” This “protection” that some people may be referring to is the 1998 Internet Tax Freedom Act. To clarify, the purpose of the Internet Tax Freedom Act is the promotion and preservation of the commercial, educational and information potential of the Internet. Under this Act, federal, state and local governments are prohibited from imposing a tax on internet access, imposing discriminatory internet only taxes (e.g., an e-mail tax), and imposing multiple taxes on electronic commerce. The Internet Tax Freedom Act (which has now been extended until 2014) specifically does not exempt sales made over the internet from sales tax, nor does is repeal any state sales or use tax - it simply requires that sales made over the internet are to be taxed (if they are taxable) at the same rate as non-internet sales. This “loophole” that is often referred to isn’t really a loophole, but the lack of “nexus” which prohibits states from imposing a sales tax collection requirement on remote sellers who lack a physical presence in their state.

Is the Main Street Legislation Just Another “Amazon Law?”

Although the proposed Main Street legislation and state “Amazon Laws” have a similar goal - to require the collection of sales tax by remote sellers who do not have a physical presence in their state – the Main Street legislation is not just another “Amazon Law”. In my “Amazon Laws: The New Normal, Internet Sales Tax Law Update” post, I explain how “Amazon Laws” are presumptive nexus laws, meaning that if a “taxpayer” engages in the activity described in the law, a presumption of nexus arises. Therefore, these “web-linking” laws focus on an expanded view of nexus – in essence, that the use of in-state “affiliates” creates a physical connection to the state.

The Main Street legislation makes no mention of nexus. What’s key here is that states must be full-member SSUTA states in order to have the right to assert a collection requirement on remote sellers. Essentially, the use of in-state “affiliates” that refer customers to a remote seller via a web-link becomes irrelevant under the Main Street legislation. Incidentally, of the 21 full-member SSUTA states, only three have “Amazon Laws” on their books – Arkansas, North Carolina and Rhode Island.

Final Thoughts

Could 2011 be the year that Main Street legislation passes? Could passage of this legislation pave the way for the reversal of Quill? Fellow blogger Barwick adds that “the difference this time around is that the proposed legislation is getting support from brick-and-mortar retailers, such as Sears Holdings, but also, surprisingly, from”. But with neither bill receiving bi-partisan support, and with the Federal government’s focus on more pressing issues, such as the looming federal deficit and the recent U.S. rating downgrade, the Main Street Legislation may never the receive the attention proponents are hoping for.


Missed my last post? Catch it here, California Enacts Explosive "Amazon Law"!

What’s up next? More Misconceptions Surrounding Internet Sales Taxes, An Overview of Affiliate Marketing and How “Amazon Laws” Affect Small-Medium Businesses, Texas' Enacts an "Amazon Law" (exact titles TBD)

About the Author: Sylvia Dion is the Founder and Managing Partner of PrietoDion Consulting Partners LLC, a SALT advisory firm which provides SALT services to businesses in the U.S. and throughout Europe, Canada, Latin American and Australia. Since 2011 Sylvia has served as a contributor to the SalesTaxSupport blogs and currently blogs on Internet Sales Tax, U.S. Sales Tax for Foreign Sellers, and Massachusetts Sales Tax. Sylvia has written articles for State Tax Notes, Bloomberg BNA and other premier tax journals. You can follow Sylvia on twitter and on Google+ and can contact Sylvia via e-mail at

Comments or questions may be submitted by using the on-page "Comment" feature, subject to disclaimer at bottom of page. Other contact options (and Consultation Requests) are also available on Sylvia's associated Firm Profile page.

Other recent “Internet Tax / E-Commerce” posts by Sylvia F. Dion, CPA:

NOTE: All blog content, comments, and participation subject to disclaimer at bottom of page.


8 Responses to Main Street Fairness Act. Is SST the Silver Bullet?

  • Posted by Marketplace on July 2, 2013 12:39am:

    [...] the past, members of Congress have attempted to pass legislation similar to the Marketplace Fairness Act of 2013 three times, [...]

  • Posted by John on October 18, 2012 4:47am:

    Collection of sales taxes is technically VERY easy. All websites use a payment gateway. Let the gateways collect and disburse the taxes. Ohio pays businesses a fee for collecting sales taxes - the gateways would love it since the payment is greater than the fee they collect processing credit cards.

  • Posted by R. on August 18, 2011 11:23am:

    Ms. Dion,
    Thank you for the lengthy response. We clearly agree on many of your points, and share your frustrations.
    I sincerely appologize if we breached this forum's rules regarding the mention of our particular service. We only mentioned it specifically because it was contextually relevant.

  • Posted by Cory on August 11, 2011 1:32pm:

    I think you may want to add a twitter icon to your blog. Just bookmarked this article, although I must do it by hand. Simply my suggestion.

    • Posted by Author photo of Sylvia F. DionSylvia F. Dion on August 11, 2011 11:28pm:

      Cory, Bonjour! (I noticed you're writing to us all the way from France!) Firstly, many thanks for your comment! I am a tax contributor to several websites and sincerely appreciate when readers take the time to both read my post and submit relevant comments. I am also an avid user of twitter. Yes, having a twitter button certainly makes it easier to create a tweet. Our STS multi-contributor blog is in its infancy - launched just one month ago. Though I can't speak directly for the publisher, STS - I am sure they are open to any suggestions to help improve the functionality of the blog. Thanks again for visiting and for your comment.

  • Posted by Main on August 11, 2011 7:13am:

    [...] committee on deficit reduction to include the legislation in its plan.  This helpful and factual article by summarizes the federal legislation comparing it to the state approaches  [...]

  • Posted by R. on August 10, 2011 6:20am:

    Yes, SSUTA is the silver bullet!
    What a great summary, thank you for your efforts to clear the air on several of these issues.
    There are two points I think should be clarified/corrected.
    1. At the beginning of the article, you said:
    "The issue of whether sales made over the internet should be subject to sales tax has been widely discussed for at least decade now..."
    To be clear, internet purchases are already subject to sales tax. The current debate is over collection obligations.
    2. I wanted to respond to the statement of Mr. Barwick regarding the small seller exception (as defined in SSUTA Sections 609 and 610). He suggests that small businesses "are the ones that generally cannot afford the expense associated with the collection of remote taxes." I would like to point Mr. Barwick and your readers to our TaxCloud service ( which handles all sales tax management obligations for retailers. TaxCloud is a SSUTA Certified Service Provider and performs calculation, collection, remittance, reporting, and even jurisdictional audits. Simply put, with TaxCloud available, the small seller exception may no longer be justifiable or necessary.

    • Posted by Author photo of Sylvia F. DionSylvia F. Dion on August 11, 2011 12:40pm:

      Many thanks for your comment! I am a tax contributor to several websites and sincerely appreciate when readers take the time to both read my post and submit relevant comments.
      In response to your specific points, let me say that you are absolutely preaching to the choir on your first point. The real issue is NOT whether sales made over the internet are subject to tax (they absolutely could be) but whether a requirement to COLLECT and REMIT sales tax on these transactions exists. I have on many, many, many occasions found myself explaining how purchases made over the internet are NOT tax free, and that unless you reside in (or in the case of a business, are domiciled in) a state that does not impose a sales tax, such as New Hampshire, your “tax-free” purchase may NOT be tax free at all. (Of course, other factors can enter into whether tangible personal property purchased over the internet is subject to sales tax, such as whether the item purchased qualifies for some type of state exemption, e.g. manufacturing.) Other misconceptions include the misunderstanding that internet sales taxes are a tax ON out-of-state internet retailers. But here again, the issue is not about imposing a tax on the on-line retailer, but about the imposition of a sales tax collection responsibility. Explaining what the use tax is, and how and where to report one’s use tax obligation is another issue I’ve often had to address. Yes, many misconceptions regarding the taxation of e-commerce abound, and unfortunately are exacerbated all too often by less than accurate news reporting. Finally, although I had originally contemplated a more expansive post which addressed several of these misconceptions, I had to balance keeping my post to a manageable length while still including as much relevant information as I could. In this case, I decided to place greater emphasis on the SSUTA section, as this is often overlook or simply glossed over. As you have visited the blogs, you’ve probably gathered that I’ll be covering e-commerce and internet sales tax issues. My plan is to address many of these misconceptions in greater detail in a near future post.
      Regarding your second point, I must say that as someone who began her career in the late 1980’s, I’m amazed by the many viable solutions that now exist for professionals charged with sales tax compliance responsibilities. In particular, solutions for the SMB market, such as those offered by SpeedTax - (recently acquired by CCH –Wolters Kluwer), Avalara - (both also SSUTA Certified Service Providers) and, of course, your company. (Note, it is a policy of STS, the owner and publisher of this website, to prohibit promotional statements in both the blog post and comments section, therefore, I cannot comment further on your particular solution, or on the solutions offered by other companies, but simply want to point out that many viable solutions are available to sales tax professionals.)
      Once again, thank you for your comment.

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