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Marketplace Fairness Act 2013: What the Symbolic Vote Means

author photo of Sylvia F. Dion

Are we closer than ever to seeing Federal Internet Sales Tax Legislation pass?

Was the March 23rd Senate vote on the Marketplace Fairness Amendment to the Fiscal Year 2014 Congressional Budget Bill an indication that the time for Federal Internet Tax legislation has come?

What exactly did the vote mean? Has the Marketplace Fairness Act 2013 officially passed?

Well first, NO, neither the Senate version (S. 336), or the House version (H.R. 684), of the Marketplace Fairness Act 2013 ("MFA 2013") has officially passed. What was voted on, and approved by a majority (75 out of 99 of the voting Senate), was language relating to the Marketplace Fairness legislation in the form of an Amendment, S.Amdt. 578, that was tacked onto a Senate Budget Bill officially known as Concurrent Resolution 8, or S. Con. Res. 8.

Many have referred to this action as a “symbolic” vote – a vote which validates that the MFA 2013 could actually garner enough Congressional support to become law. However, despite the huge show of support, the vote was non-binding, and politics being what it is, Senators who voted "yea" for S. Amdt. 578 could vote against a final proposal.

Was S. Amdt. 578 controversial? Absolutely! There were fourteen Amendments introduced to S. Amdt. 578. (Yes, there were Amendments to the Amendment to the Congressional Budget! To keep things simple, I’ll refer to them as “secondary amendments”). Every one of the secondary amendments was introduced or co-sponsored by key legislators from a “no sales tax” state (often referred to NOMAD states) - legislators which in days leading up to the vote, and since, have been very vocal about the impact of the Marketplace Fairness legislation on their constituents. These legislators include Max Baucus (D-MT), Kelly Ayotte (R-NH), Ron Wyden (R-OR), Jon Tester (D-MT) and Jeanne Shaheen (D-NH). Two of the 14 secondary amendments were approved, including Sen. Amdt. 656, a vague secondary amendment whose purpose is stated as “of a perfecting nature” (whatever the heck that means!), and Sen. Amdt. 581, which states as its purpose “to exempt remote sales of business inputs”.

But enough with the politics! What exactly does all this mean?

Although the vote was symbolic, it was non-binding and the MFA 2013 has not been enacted. (While many of you might know this, it never ceases to amaze me how some headlines give the false impression that the proposal itself was actually passed.)

What has happened since? Well, the lobbying by both proponents and opponents has been going strong. Two of the most vocal opponents include high ranking Senate Finance Chair, Max Baucus (D-MT) and respected Senator, Kelly Ayotte (R-NH), who argue that the Marketplace Fairness legislation would unfairly turn their state’s businesses into tax collectors for other states while their own states have opted not have a sales tax. In a recent article, Senator Baucus was quoted as saying, "We don't want to be a sales tax state. And so part of my job is to fend off efforts the other senators from other states are pursuing which would put a lot of pressure on us to collect sales taxes from other states when we don't even have a sales tax in our own state." Senator Ayotte has been tirelessly speaking out against the Marketplace Fairness Act, saying there is nothing “fair” about the legislation and that it should really be called the “Internet Sales Tax Collection” Act. Like Mr. Baucus, she argues that the New Hampshire has opted not have a sales tax and adds that New Hampshire has reduced the need to impose a sales tax by controlling spending. (See NH Senator Ayotte Fights Internet Sales Tax, YouTube, 3/22/13)

Still, it seems there is a lot of momentum, so the reality is that anything can really happen! There’s certainly been lots of talk about the “days of tax-free shopping coming to an end.” (I have to admit, I cringe when I hear this statement, which has been in way too many articles recently – remember, purchases made over the internet are NOT tax free for the great majority of you.)

In my last post, I detailed what the MFA 2013 (S. 336/H.R. 684) requires of states that wish to obtain collection authority. (See my March 18, 2013 post,"Marketplace Fairness Act 2013: New & Improved from MFA 2012?")

Some would say it's an improvement over the prior Marketplace Fairness Act (S. 1832, 112th Congress), and one of the reasons the S. Amdt 578 received such a huge show of support. (You might recall that the three sponsors of the prior MFA attempted a similar action this past December in a last ditch effort to have a version of the prior proposal tacked on to the Fiscal Year 2013 Defense Bill. See 12/20/12 post,Internet Sales Tax Legislation: 2012 Review – and 3 Predictions for 2013)

In my opinion, it doesn't require enough simplification!

I’m a huge proponent of local businesses - don’t get me wrong - and am much more likely to shop in a local brick-and-mortar store than on-line. And I do understand that states are missing out on significant amounts of revenue. (Like it or not – paying taxes is what gives us access to our infrastructure and government services.) But I have to say I agree with Ms. Ayotte that to paint this as a fairness bill to level the playing field for the real Main Street merchants is less than accurate. Let’s not fool ourselves, if the MFA 2013 passes, the big winners will be the big-box brick and click retailers, like Wal-mart and Target. Even will come out a big winner. On the losing side will be many small brick-and-mortar businesses – the real main-street merchants - those very businesses this legislation is supposed to level the playing field for. I’m on record as saying that many small mom and pop retailers will still go out of business while shaking their heads and saying, "Hhmm, I thought this was supposed to bring buyers back in droves." Yes, this is sad!! But Amazon and the big brick-and-click sellers with their vast selection, distribution network, free or low cost shipping and the convenience of shopping when one's schedule permits, will keep people shopping on-line. I’ve said time and time again, people who shop on-line, do so for MANY reasons. Yes, their false belief that they’re purchasing something "tax free" may add to that decision – but it is NOT the only reason.

The other losing contingency? Small internet sellers – those that aren’t small enough to qualify for the small seller exception, but yet so small that the requirement to collect and remit sales tax will impact them. And the small seller exception of $1,000,000? While it certainly sounds like a lot when you talking about gross revenues, consider that after operating expenses this might translate to a small net profit or even a loss. I have had several small internet sellers say to me that if they have to start collecting sales tax in many states, they will simply close down their internet businesses.

And while the technology to handle the thousands of sales tax rates across the country does exists - and this software has been perfected by many of the excellent sales tax solution providers that exists today - it's not just about calculating the correct rate. As new blogger Patricia Pellino points out in her Sales Tax Automation post this week, “in spite of what you may read in some of those Marketplace/Main Street articles about the ready availability and ease of sales tax solutions – most sales tax automation projects are not “plug-and-play” scenarios.

Coincidentally, earlier this week, I was approached for a few quotes by a writer for an e-Commerce News and Advise online periodical. (She had read my blog posts here at SalesTaxSupport!) Here’s what I said when asked about sales tax automation. "There are already many excellent sales tax automation tools available, and because the Marketplace Fairness Act 2013 will require that states make free sales tax calculation software to sellers, I anticipate a flood of new sales tax tools and solutions will surface. But sales tax is complex! Some states have a variety of rates that could apply to a particular sale, what is and isn’t subject to sales tax isn’t always clear, plus many states have 'sales tax holidays' usually around the back-to-school time season, which out-of-state internet sellers are required to comply with. Think about a seller in Massachusetts who makes internet sales to customers in Texas, a state with many different rates. It is highly impractical for the Massachusetts seller to know how much to charge on shipments to Texas customers without a software tool. Then, factor in that when Texas has a sales tax holiday, the Massachusetts seller must not only be aware of it, but has to know that internet sales made during the Texas sales tax holiday will be sales-tax exempt. In a nutshell, complex!" And I didn't even address things like drop-shipments and exemption certificates and sales tax on shipping and other potential issues.

Perhaps I should have titled this post, "Are we ready for the complexity?"

Yes, I do believe anything could happen and we very well could be watching history in the making!! If the MFA 2013 or a similar proposal that seeks to turn remote businesses into sales tax collectors is enacted, I hope that the final legislation is drafted with the most comprehensive, demanding and meaningful simplification and uniformity possible. I hope that nothing less is acceptable!


Missed my last post? Catch it here: “Marketplace Fairness Act 2013: New & Improved from MFA 2012?

What to see more of my blog articles on Internet Sales Tax issues? See the “Other recent Internet Tax / E-Commerce posts by Sylvia F. Dion” listed below or view my contributor page here at for a full list of my blog articles.

What’s up next? A special update post on State “Amazon Laws”, including what states have enacted them and how the different types of provisions within these laws compare. This will coincide with’s launch of the by-state Amazon Law section.

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.


3 Responses to Marketplace Fairness Act 2013: What the Symbolic Vote Means

  • Posted by Author photo of Sylvia F. DionSylvia F. Dion on April 19, 2013 11:48pm:

    I appreciate the comment and commend you and The Marketplace Fairness Organization (the pro-MFA advocacy organization founded by FedTax/TaxCloud) for sharing articles such as mine, which may offer a different point of view from yours.
    However, I do feel a need to point out that in my blog post, I complement the various sales tax software solutions available today. As I note “the technology to handle the thousands of sales tax rates across the country does exists - and this software has been perfected by many of the excellent sales tax solution providers that exists today.” I re-itterate this in my quote to the writer who posed questions to me. Your solution, TaxCloud, as well as the solutions of MANY of your competitors most certainly fall into this “excellent sales tax solution providers” category ;) Therefore, I do believe that I make clear that the handling of thousands of sales tax rates (which is really what the 1967 complexity argument is based on) is manageable today.
    My issue on complexity isn’t about that ability to calculate thousands of rates - it’s about ALL the other issues and uncertainties that impact sales tax administration, such as what is and isn’t taxable, the challenge in drop ship scenarios of determining which party is responsible for the collection of sales tax, whose exemption certificate is acceptable in drop ship scenarios (the distributor’s or final customer's) and what the value subject to sales tax should be, what types of exemptions could apply to a transaction (does the purchase qualify for the manufacturing exemption, R&D exemption, will the purchased product be incorporated into a finished product, is it a purchase for re-sale, will it be used in agriculture), the impact of sales tax holidays, the taxability of "2 for 1" or buy-one-get-free offers, the taxability of sales to non-profits or to government entities, what exemption form is the correct form and how long is that form valid for, how bundled transactions are taxed and what processes must the vendor have in place to ensure the entire invoice isn’t subject to tax, is shipping subject to tax, how digital downloads are taxed, what value is subject to tax when a product is obtain with a Groupon type voucher – the list goes on and on and on. My point on complexity doesn’t revolve around the 1967 argument that it’s impossible to collect the thousands of rates that exists (yes, that can be done today), it’s about ALL of the rules, regulations, nuances – COMPLEXITY - that sellers have to deal with.
    While I respect your opinion as an entrepreneur and technologist, I stand by my position as an experienced tax professional, that sales tax IS complex and my belief that the MFA 2013 doesn’t demand enough of states that would benefit from its enactment. I do believe federal internet tax legislation could very well pass – but I also believe the outcome will be much different than what it being portrayed.

    • Posted by Todd on April 27, 2013 5:39am:

      I agree with Sylvia. Rates don't equal solution. I also like Sen Baucus's comment, "We don't want to be a sales tax state." State sovereignty should be preserved.

  • Posted by David on April 14, 2013 1:54pm:

    Sad to read your adoption of the complexity argument - particularly for small sellers. We can testify that several thousands of online retailers (most extremely "small") already collect sales tax everywhere. This debate should move beyond the 1967 argument of complexity.

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