Will Congress Green Light the Main Street Fairness Act?
by AccountingWEB on
By Ken Berry
As more Americans continue to shop by entering just a few keystrokes, new proposed legislation could return foot traffic to traditional retail outlets. Under the Main Street Fairness Act of 2011, Internet and mail-order sellers would be required to collect and remit sales tax to states that elect to participate in a federal program.
The controversial new bill was introduced in August by Senator Dick Durbin and U.S. Representatives John Conyers and Peter Welch. The Main Street Fairness Act doesn't ask anyone to pay a single penny more in taxes," said Durbin in a press release. "Instead, it would help governors and mayors collect taxes that are already owed."
To qualify, a state must sign up with the Streamlined Sales and Use Tax Agreement (SSUTA) and adopt legislation implementing its use. This comprehensive interstate system coordinates various sales tax rules and administrative matters. Currently, twenty-four states have joined the SSUTA.
Proponents of the Main Street Fairness Act point out that online sellers have a distinct advantage over brick-and-mortar retailers who must charge state and local sales taxes in jurisdictions where they have a "physical presence." Naturally, revenue-hungry states are also strong supporters of the bill. On the flip side, online retailers have long cited a U.S. Supreme Court case (Quill Corp. v. North Dakota (91-0194), 504 U.S. 298, 1992) as authority to avoid charging sales tax to consumers in states in which the retailers lack a physical presence. They also argue that imposing this responsibility would create a logistical nightmare.
Among other aspects, the Main Street Fairness Act:
- Certifies the SSUTA;
- Provides states with definitive authority requiring all retailers to collect sales tax;
- Releases consumers from their sales tax remittance obligations; and
- Extends the same sales tax collection responsibilities to all retailers.
The proposed legislation has touched a nerve in the business community. "Businesses continue to struggle with making nexus determinations and naturally become concerned when states work to expand activities that create nexus," says Bill Schenkelberg, National State and Local Tax (SALT) Director for Clifton Gunderson. "My clients regularly look at me with disbelief when I explain to them that an extremely limited or minimal connection to a state, even if it is by another independent business, can create a filing requirement. Combine that with the complex nature of sales tax laws – even under the Streamlined Sales and Use Tax Agreement – and a multitude of jurisdictions and the administrative considerations become scary."
But Schenkelberg doesn't necessarily agree that the law levels the playing field. "I find it interesting that most articles written about the Main Street Fairness Act are written from the perspective of the bricks-and-mortar businesses and the 'unfairness' of Internet sales avoiding sales tax," he comments. "Another perspective is that the bricks-and-mortar businesses also have advantages Internet businesses do not, such as the immediate gratification of their customers; the ability to be part of the community; the ease of returns; and the availability for customers to actually see, touch, and hold the product prior to purchase. While 'in practice,' the Internet allows the ability to avoid sales tax (nobody ever mentions the use tax responsibility of the purchasers) and to shop in your pajamas, it cannot offer these other advantages. Could it be argued that the Main Street Fairness Act is actually 'unfair' to the Internet retailer?"
You may like these other stories...
Treasury prepares options to address tax inversionsDamian Paletta of the Wall Street Journal reported on Monday that US Treasury Department officials are assembling a list of administrative options for Treasury Secretary...
Deloitte CEO Joe Echevarria to retire to pursue public serviceMichael Rapoport of the Wall Street Journal reported that Deloitte LLP CEO Joe Echevarria plans to retire later this month to pursue his interest in public...
If your clients include retailers, pending federal legislation allowing states to tax Internet sales could mean big changes in the way they process and account for their sales and use taxes.In July, the Marketplace and...
Upcoming CPE Webinars
Meet budgets and client expectations using project management skills geared toward the unique challenges faced by CPAs. Kristen Rampe will share how knowing the keys to structuring and executing a successful project can make the difference between success and repeated failures.
This webcast will include discussions of recently issued, commonly-applicable Accounting Standards Updates for non-public, non-governmental entities.
Excel spreadsheets are often akin to the American Wild West, where users can input anything they want into any worksheet cell. Excel's Data Validation feature allows you to restrict user inputs to selected choices, but there are many nuances to the feature that often trip users up.
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.