U.S. brick-and-mortar retailers and other supporters are hopeful that Congress may finally act on legislation that would close a loophole created by a 1992 Supreme Court decision. That loophole has allowed online and catalog retailers to avoid collecting sales taxes from customers who live in states where those businesses have no store or other physical presence.
States argue that they are losing millions in sales taxes, and retailers that have physical stores complain that the ruling has given online-only sellers an unfair advantage.
There are currently two proposals pending in Congress — one in each the House and the Senate.
Rep. Steve Womack (R-Ark.) introduced legislation in the House of Representatives last year with Rep. Jackie Speier (D-Calif.) that would allow states that take steps to simplify their sales-tax regimes to require online and other remote sellers to collect sales taxes from customers who live in states where those businesses have no store or other physical presence.
The bill offered last November by Sens. Mike Enzi (R-Wyo.), Dick Durbin (D-Ill.), and Lamar Alexander (R-Tenn.) would offer states two ways to comply with the bill's tax simplification requirements: states could either sign on to the Streamlined Sales Tax project, an initiative launched by states to simplify their sales and use tax rules; or they could adopt some tax simplification provisions included in the bill.
The two bills also differ in how big of an exemption they would provide for small businesses; however both chambers would authorize states that take steps to simplify their sales-tax regimes to require online retailers to begin collecting sales taxes from their out-of-state customers.