Skip to content

Senate Approves Expanding State Tax Authority on Internet Sales

1 min readBy: Joseph Bishop-Henchman

The U.S. Senate yesterday voted 69-27 to approve the Marketplace Fairness Act, which gives states the power to collect sales taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. es from out-of-state businesses (primarily Internet and catalog retailers). Opponents were senators from states without a sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. and most of the Tea Party caucus Republicans. Most conservative and libertarian activist organizations opposed the bill; supporters included state officials, large retailers, and

The question now becomes what will happen in the House of Representatives, and what will need to be attached to or modified in the bill for it to be considered. (In the Senate, the bill was discharged out of committee due to opposition by Finance Committee Chair Sen. Max Baucus (D-MT).)

Here are some key Tax Foundation materials on the Marketplace Fairness Act:

  • Our summary of the Marketplace Fairness Act.
  • Our graphic of what’s in and what’s missing from the Marketplace Fairness Act.
  • Our recent podcast on the Marketplace Fairness Act.
  • My appearance on NPR yesterday, where I discuss the bill and the longer-term implications for tax policy, alongside a small Internet-based business and two tax software providers (those companies are seeing dollar signs thanks to this bill).
  • My most recent testimony to Congress on the bill.
  • New evidence that the University of Tennessee estimates for uncollected Internet taxes are excessive: it’s more like $3 billion, not $11+ billion.
  • The Senate hearing on the Marketplace Fairness Act, which derailed when the proponents’ star witness admitted he was collecting based on an incorrect “origin-based” standard.
  • The latest action on state-level “Amazon” taxes.
  • Our larger report analyzing the constitutionality and wisdom of state-level “Amazon” taxes.