Senator Durbin Introduces Main Street Fairness Act, Federal Sales Tax Fairness Legislation

On Friday, July 29, Sen. Dick Durbin (D-IL) introduced the Main Street Fairness Act, federal sales tax fairness legislation that would authorize states under the Streamlined Sales and Use Tax Agreement (SSUTA) to require remote retailers to collect and remit sales tax in those states. The legislation is co-sponsored by Senators Tim Johnson (D-SD) and Jack Reed (D-RI) in the Senate and Representatives Heath Shuler (D-NC), John Conyers (D-MI), and Peter Welch (D-VT), in the U.S. House of Representatives. At present, 24 states belong to the Streamlined Sales Tax Project (SSTP).

SSUTA is an effort created by state governments, with input from local governments and the private sector, to simplify and modernize sales and use tax collection and administration, making it much easier for online retailers to collect sales tax. Retailer participation in SSTP is voluntary, but more than 1,000 businesses in the 24 participating states have agreed to collect sales tax on remote sales.

“Consumers shouldn’t have to face the burden of reporting all of their online purchases. Main Street retailers collect sales taxes on behalf of consumers, why shouldn’t online retailers do the same?” said Durbin in a statement. “In 2012, states across the country, including Illinois, are expected to lose as much as $24 billion in uncollected state and local taxes on Internet and catalog sales. From 2005 to 2010 the state of Illinois estimated it lost $153 million each year. The Main Street Fairness Act doesn’t ask anyone to pay a single penny more in taxes. Instead, it would help governors and mayors collect taxes that are already owed.”

“ABA wishes to thank Senators Durbin and Reed, and Representatives Conyers, Shuler, and Welch for introducing the Main Street Fairness Act, which would level the playing field for bricks-and-mortar stores in the SSUTA member states,” said ABA CEO Oren Teicher. “For too long, our member bookstores have had to compete against remote retailers, such as Amazon.com, that ignore their obligation under the law to collect and remit sales tax, despite clear nexus in states. This inequitable situation undercuts states' ability to close their budget deficits and unfairly penalizes small businesses, which should be engines of job growth. When remote retailers refuse to acknowledge sales tax laws, they maintain an unfair competitive edge over bricks-and-mortar retailers. The time has come for Congress to act.”

Teicher stressed that ABA, which has supported the Streamlined Sales and Use Tax Agreement for over a decade, has always believed a federal solution is the best answer to the current sales tax inequity, "though we have never felt that advocating for a state solution was in conflict with the goal of e-fairness."

While Amazon.com has publicly stated its support for the Main Street Fairness Act, large states such as California, Illinois, and New York – where Amazon.com is fighting sales tax fairness laws -- are not part of SSUTA. Moreover, the company’s support for federal sales tax fairness legislation appears at odds with a recent report by the Wall Street Journal [1] that shows the extraordinary lengths the company is going to in its effort to “minimize sales-tax collection across the U.S.”

“While supporters of sales tax fairness welcome Amazon.com's conciliatory comments regarding Sen. Durbin's legislation, actions speak far louder than words," said Teicher. "The recent Wall Street Journal coverage makes clear just how hard Amazon has worked to avoid collecting sales tax to maintain an inequitable price advantage. It would be heartening to see them dedicate as much effort and resources at quickly implementing a national sales tax solution. Simpler still would be for them today to begin collecting the state sales tax that current law mandates. ”

The Main Street Fairness Act would not require any additional taxes to be collected by retailers that are not already owed. Instead, Durbin noted, the legislation would:

• Certify SSUTA;

• Provide states that choose to use it with the clear authority to require retailers to collect sales taxes already owed;

• Require the Streamlines Sales and Use Tax Agreement to meet a lengthy list of simplification requirements to ease administrative burdens for sellers;

• Exempt small businesses (as defined by the Governing Board of the Agreement) from collecting sales taxes;

• Compensate retailers for start-up administrative costs associated with collecting sales taxes;

• Treat all retailers equally regarding sales tax collection;

• Release consumers from their existing sales tax remittance obligations; and

• Help states and localities collect billions in taxes that are already owed.

The Main Street Fairness Act is supported by ABA, the National Governors’ Association, National Conference on State Legislatures, Governing Board of the Streamlined Sales and Use Tax Agreement, National Retail Federation, International Council of Shopping Centers, Retail Industry Leaders Association, National Association of Real Estate Investment Trusts, and National Association of College Stores.

The following states that have passed legislation to conform to the Streamlined Sale and Use Tax Agreement: Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Washington, West Virginia, Wisconsin, and Wyoming.

Recently, conforming legislation was introduced in Texas, Massachusetts, Florida, Illinois, Virginia, Missouri, Maine, California, and Hawaii.