In Our View: Balance Field for Sales Taxes

Marketplace Fairness Act makes mild progress in Senate



Members of Congress love to affix euphemistic titles to their bills. Any day now we expect the “Survival of the Human Species Act” to be brought before lawmakers. But in contrast to that trend, the Marketplace Fairness Act is as accurate as it is succinct.This business-friendly bill would level the playing field by allowing states to require online retailers to collect state and local sales taxes. Currently, brick-and-mortar businesses must do so, but their Internet competitors enjoy an unfair advantage. On Monday, the Senate voted 74 to 20 to take up the bill and could take a formal vote soon. That’s good news not only for Washington state businesses, but for the state government.

One of the supporters of House Bill 684 is U.S. Rep. Suzan DelBene, who happens to be a former director of the state Department of Revenue. That department estimates passage of the Marketplace Fairness Act would bring in about $284 million to the state in 2013-15 and about $845 million in 2015-2017. If that increase looks overly optimistic, keep in mind that online sales soared last year to $226 billion nationally (almost 16 percent higher than 2011). Included in the 2015-2017 revenue would be an estimated $278 million for cities and counties.

To be clear, this is not a new tax. It’s a tax that goes largely uncollected because of the unfair loophole. One of the great ironies in this issue is that many states with both state sales taxes and state income taxes require residents to pay the former when they file returns for the latter. That’s pretty much a joke, though. “I do know about three people that comply with that,” Sen. Mike Enzi, R-Wyo., said in a recent Associated Press story.

Enzi is among 11 Senate Republicans who joined 22 Democrats to sponsor the Senate bill. A similar House bill lists 24 Republican sponsors and 39 Democratic sponsors. We urge U.S. Rep. Jaime Herrera Beutler, R-Camas, to join the list of sponsors. Contacted Wednesday, Herrera Beutler said she was undecided: “The argument of fairness made by brick-and-mortar retailers resonates with me, but I can also understand the difficulty for Internet retailers in complying with so many different sales tax jurisdictions. I would very much like to hear more from the people of Southwest Washington. My vote would be based on whether this is best for the families in my district, so receiving different points of view from the region will be valuable.”

Opponents complain that the bill would create an unfair burden on small businesses. But businesses with less than $1 million a year in online sales would be exempt. Furthermore, states would be required to provide free computer software to help retailers calculate sales taxes. States also would have to establish a single source for collecting online sales tax revenue, rather than requiring retailers to send sales taxes to individual counties or cities.

Among the many supporters in the private sector is online retailer, which according to company Vice President Paul Misener “has long supported a simplified nationwide approach that is evenhandedly applied and applicable to all but the smallest-volume sellers.” National Retail Federation CEO Matthew Shay has said: “While local, community-based stores and shops compete (with online retailers) for customers on many levels, including service and selection, they cannot compete on sales tax. Congress needs to address this disparity.”

We could not agree more. Congress should set aside partisan differences and do the right thing by passing the Marketplace Fairness Act.