Sales tax fairness is back, again

Washington, D.C.--Another bill designed to close the loophole that allows online retailers to avoid charging sales tax in certain states was introduced in Congress this week, the latest in a line of proposed pieces of legislation designed to end the debate over “sales tax fairness” that’s gone on for more than a decade. 

A bipartisan group of lawmakers headed by Utah Republican Rep. Jason Chaffetz introduced the Remote Transactions Parity Act, or RTPA, on Monday. 

RTPA picks up where the last Internet sales tax fairness bill, the Marketplace Fairness Act, died--in the U.S. House of Representatives. 

Like similar bills introduced in the past, RTPA would allow the 45 sales-tax-collecting states and the District of Columbia to collect sales tax on online and other remote purchases directly from sellers, whether they have a “physical presence” in that state or not. (The five states that don’t collect sales tax are: Alaska, Delaware, New Hampshire, Montana and Oregon.)

The way the law is written now, online giants like Amazon and Blue Nile don’t have to charge sales tax in states where they don’t have offices or distribution centers (i.e., a physical presence) and it is instead up to consumers to remit those taxes to the states when they do their returns, which few do.

Business groups, including Jewelers of America, have argued for years that this is an unfair loophole in the law that puts brick-and-mortar retailers at a competitive price disadvantage. It is particularly problematic for jewelers because of the high value of the items they sell; not having to pay sales tax on, for example, a $5,000 engagement ring can sway a consumer to buy online rather than from a local store, brick-and-mortar jewelers have argued. 

Congress has been unable to reach an agreement on any of the sales tax fairness bills introduced so far, and one of the recent stumbling blocks involves concerns over how the new law will impact small online retailers. 

However, creators of the latest iteration of sales tax fairness, the RTPA, said the bill contains a number of provisions designed to address these concerns.

The act would require states to provide sales tax collection software and integration to remote sellers free of charge, and contains an exemption for smaller online retailers. 

According to a summary of the bill, the exemption applies to smaller sellers with gross annual receipts of under $10 million