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Internet Sales Tax Legislation: 2012 Review - and 3 Predictions for 2013

author photo of Sylvia F. Dion

When I first began writing this post I had intended to revisit the status of State “Amazon Laws”. With the holiday season upon us, and cyber-shopping in full swing, I thought I’d send folks a gentle reminder that sales made over the internet are not “tax-free” (for the vast majority), but also provide an update on which states had passed legislation that would require out-of-state sellers to collect sales tax. (Certainly more of you have noticed sales tax being charged on your internet purchases this year...)

But with just two weeks left before the 112th Congress disbands, I simply had to revisit what must be on many of your minds. Does federal remote legislation have any chance of passing at this late date?

Now you‘ve probably heard me say, that of the three federal “internet sales tax” proposals introduced by the 112th Congress – the Main Street Fairness Act (S. 1452 / H.R. 2701), the Marketplace Equity Act (H.R. 3179), and the Marketplace Fairness Act (S. 1832) – only H.R. 3179 and S. 1832, the last two proposals, have been contenders to pass for some time now. The Main Street Fairness Act (S. 1452, H.R. 2701), introduced in July of 2011, lacked bi-partisan support, would grant collection authority solely to Streamlined Sales & Use Tax Agreement (“SSUTA”) full-member states, and thus was never able to garner much support.

On the other hand, the Marketplace Equity Act (H.R. 3179), introduced in October 2011, has at times been a real contender for passage. H.R. 3179 was a bi-partisan effort with no ties whatsoever to the SSUTA or the Streamlined Sales Tax (SST) Governing Board. The Marketplace Equity Act has its own set of simplification and other requirements that states would need to implement in order to be granted the authority to require out-of-state (remote) sellers to collect their state’s sales tax even without nexus.

For some, this lack of a connection to the SST was perceived positively. For instance, back in November of 2011, a question arose during a Judiciary Committee about why any proposal should be allowed to “cede authority to the Streamlined Sales Tax Governing Board”. The point of the question being that allowing the SST Governing Board to dictate the simplification requirements and processes that states must meet to be granted collection authority would be similar to making the SST Governing Board into a non-elected, non-legislative body. (See my 12/22/11 post, Sales Tax Act – Main Street or Marketplace. Is SST Issue Key?, for more on the Judiciary Committee hearing.)

The Marketplace Equity Act’s small-seller exception is also the highest and most flexible of the three proposals. For instance, under H.R. 3179, remote sellers with annual U.S. gross receipts of $1,000,000 or less would be exempt from collecting sales tax in states that implement the Marketplace Equity Act’s simplification and other requirements. Implementing states also have the option of exempting remote sellers with less $100,000 or less in gross sales to their state and of determining higher threshold amounts.

However, despite the Marketplace Equity Act’s advantages, the proposal garnering the most attention in recent days has been the Marketplace Fairness Act (S. 1832), introduced in November of 2011. Despite the lesser small-seller exception of $500,000 in annual U.S. gross receipts, S. 1832 offers states two options for obtaining collection authority – states can either become full-member SST states or implement the Marketplace Fairness Act’s alternative set of simplification and other requirements. For states that had already simplified their sales tax collection and administration systems in accordance with the SSUTA, this proposal would respect the years of effort put forth by the SST project, and would grant full-member SST states almost immediate collection authority. And for those states that have been reluctant to become SST members, such as California and Texas, this proposal would give them the same collection authority upon implementing the Marketplace Fairness Act’s alternative requirements.

Sure enough, the most recent efforts to see remote seller legislation passed have focused on the Marketplace Fairness Act. Two weeks ago, the three sponsoring Senators of S. 1832, Dick Durbin (D-IL), Mike Enzi (R-WY), and Lamar Alexander (R-TN), attempted to have a remote seller collection amendment included in the National Defense Authorization Act (“NDAA”) for Fiscal Year 2013 (S. 3254). Much to their dismay, the Senate decided to vote on the NDAA, which was overwhelmingly approved by the Senate on December 4th, without the amendment.

On December 5th, the day after the Senate voted to pass the NDAA without the remote seller amendment, hundreds of state legislators convened to lobby for passage of the Marketplace Fairness Act (S. 1832). This lobbying effort, which included meeting with the key sponsors of S.1832, Michael Enzi (R-WY) and Steve Womack (R-AR), occurred while state legislators were in the Capital for the Fall Forum of the National Conference of State Legislatures, one of the many organizations supporting the passage of S.1832.

And just one week ago, on December 11th, the National Governor’s Association sent a letter to Senate Finance Committee Chairman, Max Baucas (D-MT), and Ranking Member, Orin Hatch (R-UT), urging the passage of the Marketplace Fairness Act.

Concluding Thoughts

By the way, this isn’t this the first time Congress has introduced legislation that would require remote sellers to collect sales tax in states where they lack nexus. H.R. 5660, also called the Main Street Fairness Act, was introduced by now retired Representative, William DelaHunt in 2010 (111th Congress). DelaHunt also introduced similar legislation back in 2007 (110th Congress). That proposal, H.R.3396, was called the Sales Tax Fairness and Simplification Act.

But never have three separate proposals been introduced by the same Congress. Yep, without a doubt, the push to require remote sellers to collect sales tax in states where they lack nexus, has never garnered the level of attention that it did during this session.

Will federal remote legislation pass in the coming days? I’ve always said, “it ain’t over till the fat lady sings”, but the curtain is slowly coming down without a performance. And with ‘fiscal cliff’ talks still at a stalemate, it seem unlikely federal remote legislation will get the attention it otherwise might have.

So what happens next? If federal remote seller legislation is not acted on favorably by January 3, 2013, the last day of the 112th Congress, legislation will need to be re-introduced by the next Congress. I ask myself if this could possibly be the last post I write about the Main Street Fairness act, the Marketplace Equity Act, and the Marketplace Fairness Act. Gosh, I’ve become quite attached to these proposals! (gently dabbing tears from eyes.)

But alas, I predict new legislation will be introduced by the 113th Congress. And opposing sides will once again prepare their eloquent arguments, with proponents clamoring that federal legislation is needed to “level the playing field” and close the so-called internet tax “loophole”; while opponents will cry that enacting such legislation, which would overturn Quill, would do away with the fundamental ideal that one state’s sovereignty should stop where another state’s begins.

I predict too, that states’ efforts to pass “Amazon” legislation (which never totally ceased), will again capture the spotlight as states react to the absence of a federal solution. (See what’s coming next below for my upcoming report on State “Amazon Laws”.)

Finally, I predict that I’ll be covering and reporting on whatever new developments arise, so if you'd like to stay with me - make sure to subscribe to the blog and follow me on twitter, @SylviaDionCPA (I tweet my posts).

In the meantime, if you’d like to revisit my prior coverage of the federal remote seller proposals, see my blog contributor page for a full listing of my SalesTaxSupport “Internet Tax” articles. And don’t forget our whitepaper, “Internet Sales Tax Legislation: What it Means to Small-Medium e-Commerce (A Plain English Guide)”.


Missed my last post? Catch it here: “Top Internet Tax Issues from Retailers Reveal Complexity of Issue

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, plus a by-state chart summarizing the laws.

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 Internet Sales Tax Legislation: 2012 Review - and 3 Predictions for 2013

  • Posted by Pat on December 23, 2012 7:20pm:

    Sylvia, thanks! This is excellent writing ... informative and interesting - an unusual combination. Quick question, have you written anything about the impact of Free Trade Zones on the remote sellers and on the proposed legislations?

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