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Marketplace Equity vs. Marketplace Fairness. Is Either the 'Right' Solution?

author photo of Sylvia F. Dion

The Marketplace Equity Act versus the Marketplace Fairness Act. Is one clearly the better proposal? Is either the “right” proposal to enact?

If you’re reading this blog post there’s a good chance that you’ve been following our coverage of the three federal proposals that would require out-of-state (“remote”) retailers to collect sales tax in states in which they do not have sales tax nexus. You’re probably also aware that within the last month, two of these proposals have been the subject of Congressional hearings.

The first of these two hearings occurred on July 24th, when the House Judiciary Committee met to discuss the Marketplace Equity Act (H.R. 3179). Then, on August 1st, the Senate Commerce, Science and Transportation Committee met to discuss the Marketplace Fairness Act (S. 1832).

You may recall that the Marketplace Equity Act (H.R. 3179), the second of the three federal remote seller proposals, was introduced on October 12, 2011 by Representatives Jackie Speier (D-CA) and Steve Womack (R-AR). (See my 10/25/11 post, The Marketplace Equity Act: The New Competition on the Block, for more on the Marketplace Equity Act)

The Marketplace Fairness Act (S. 1832), the third and last of the three proposals, was introduced on November 9, 2011 by Senators by Mike Enzi (R-WY), Lamar Alexander (R-TN), Dick Durbin (D-IL). (See my 11/28/11 post, From Main Street to Marketplace Fairness Acts – Sales Tax 2011, for more on the Marketplace Fairness Act.)

Now the mere fact that these two proposals reached the committee hearing stage is remarkable, as the great majority of bills that are introduced during a U.S. Congressional session never become law. According to, a non-profit, non-partisan public resource organization that tracks legislation, only about 4% of the thousands of pieces of legislation introduced by Congress each session become law., another bill tracking transparency organization reports that there have been 11,553 bills and resolutions introduced by the current 112th Congress, and only about 5% will become law. As a recent blog stated, “The vast majority of bills are essentially dead upon arrival.”

If you watched the Judiciary Committee hearing on the Marketplace Equity Act (H.R. 3179), or the Commerce Committee hearing on the the Marketplace Fairness Act (S. 1832), you're familiar with the hearing structure and probably agree that these hearings can actually be amusing at times. For those of you less familiar with the hearing process, the Committee invites selected witnesses, such as high profile executives with organizations that have a stake in the future of the legislation, officials from various “think-tank” policy organizations, representatives from organizations that represent trade or industry groups impacted by the legislation, or other selected individuals, to give their expert testimony at the hearing. Also testifying are the key sponsors of the legislation under discussion.

The general format is that Committee Chair opens the hearing with his statement and each of the witnesses present their testimony which is generally geared towards their argument for or against the proposed legislation. The committee members are then “recognized” and allowed to bring up issues, concerns and pose questions to specific witnesses or to the entire panel. (To view the two committee hearings, see the list of witnesses and read their prepared statements, click here for the July 24th Judiciary Committee Hearing on the Marketplace Equity Act and here for the August 1st Senate Commerce Committee hearing on the Marketplace Fairness Act)

While the general consensus of the Judiciary Committee hearing observers was that the Marketplace Equity Act hearing was relatively congenial and focused on what the “right” small seller exception threshold should be, the Senate Committee hearing on the Marketplace Fairness Act was not as friendly.

Actually this one seemed destined for controversy even before the hearing started when the day before the hearing, the Wall Street Journal published an Opinion piece by South Carolina Senator, Jim DeMint, who argued that enacting the Marketplace Fairness Act was the equivalent of creating “taxation without representation”. (See WSJ Opinion - JimDeMint: No Internet Taxation Without Representation, Wall Street Journal, July 31, 2012) It wasn’t surprising to see the Retail Industry Leaders Association (RILA) quickly counter with a press release in which they addressed (or should I say, shot down) Senator DeMint’s OpEd. (See Retailers Debunk DeMint WSJ Op Ed, Retail Industry Leaders Association (RILA) Press Release)

More controversy followed when it was discovered during the hearing's discussion, that an Austin, Texas based bookseller, whose CEO and Co-owner was one of the panel witnesses, was likely incorrectly charging the Austin, Texas sales tax rate on internet sales to shipments outside of Texas. (The media had a field day with that one.)

More feathers were ruffled after the Tax Foundation reported that an official from the Streamlined Sales Tax Governing Board stated during the hearing that the right type of “software” (to manage the thousands of sales tax rates) wasn’t yet available. (Note, I'm not certain this official really meant that software to calculate sales tax for all the application jurisdiction is not yet available, as this software is available.) (See U.S. Senate Online Sales Tax Hearing Derails as Witnesses Show Collecting is Not Easy, 8/1/12; and Streamlined Sales Tax Executive Denies Saying Reliable Products Aren't Available, 8/6/12 – both posts published on the Tax Foundation Tax Policy Blog)

There’s certainly been no shortage of media coverage on both hearings, many passionately presenting both sides of the debate. (Also see, Not Taxing Internet Retailers Harms Local Economies, US News Debate Club, 8/8/12, and Will U.S. Online Sales Tax Mandate Hurt Small Business?, Practical e-Commerce, 8/1/12)

But has there been enough coverage on what really could happen if either the Marketplace Equity Act or the Marketplace Fairness Act passes? Or should I say, what might not happen even if one of the two proposals is passed? Is federal legislation that offers a national solution really the panacea for States fiscal woes? Is either proposal the "right" solution?

Last week, I stumbled on an interesting poll I found on eBay’s site, which asked “Which aspect of the Internet sales tax debate do you think is being most overlooked by the media?” The response choices included the following; that many goods sold online in secondary markets have already been taxed, that expecting a small business to navigate 9,000 tax jurisdictions and 45 different tax filing procedures is unfair, that big retailers have the real advantage over “mom and pop” stores because they can negotiate better shipping rates, lower cost of goods and tax breaks by local and state governments, and that it’s not taxes, but rather selection, pricing and availability that generally create a competitive advantages for online businesses. (To see the eBay poll and vote, click here.)

The poll got me to thinking about a few things. One, is that I'm convinced people shop on-line for reasons other than their perceived belief that their purchases are "tax-free". (But there's certainly been no shortage of articles screaming that the days of "internet tax free shopping" are almost gone.)

But what if federal legislation passes and states don’t get the revenue their hoping for. What if the real Main Street retailers (and by this I mean, I mean the small mom and pop shops, not the big box chains) don’t see customers returning in droves? Then what?

What's certain is that is a interesting time to be witnessing these developments. Will federal legislation pass this year? (An election year, mind you!) I’m not sure, but as I've said before, I do think the wheels have been set in motion. What about you, what are your thoughts? Post a comment and let me know. In the meantime, I'll keep readers posted on developments!


Want to revisit the provisions in the Marketplace Equity Act and the Marketplace Fairness Act? See my prior posts:

Also see our recent whitepaper (which compares the small-seller exception of each proposal):

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.


1 Responses to Marketplace Equity vs. Marketplace Fairness. Is Either the 'Right' Solution?

  • Posted by AnnetteNellen on August 15, 2012 12:47am:

    Several months ago, I thought one of the bills, likely S. 1832 endorsed by Amazon and open to non-SSUTA states would pass as a way for Congress to tell the states that it helped them out - they would be able to go out and get the $26 billion they said they were missing. But with the issues raised and unresolved from hearings on the bills, I don't think we'll see legislation passed.
    Also, a bill like HR 3179 with a $1 million de minimis rule is aimed at getting the large retailers to comply. But Amazon is already making some deals in big states such as Texas and will soon start collecting in California. So, perhaps interest in Congress will wain.
    A large de minimis rule means that states still face the issue of trying to get consumers (and businesses) to self-assess and pay use tax. I think the states would be wise to keep pushing use tax education and simply ways of complying such as the use of look-up tables like California added last year.
    While the debate is usually focused on getting the big Internet vendors to comply, if a bill passed, many Main Street Retailers would be subject to new collection because many of them also sell online.
    It seems to me that a lot more education on the issues and further simplification is needed before we'll see Congress act this year - which is the 20th anniversary of the Quill decision. It's been a long wait.

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