ANAHEIM, CALIF.—The World Floor Covering Association (WFCA) has endorsed and is in full support of Senate Bill 1452, “The Main Street Fairness Act,” which addresses a fundamental unfairness allowing out-of-state Internet and mail order companies to avoid collecting and remitting state and local sales taxes while local brick-and-mortar stores are obligated to collect these fees, noted Chris Davis, WFCA’s president and CEO.
According to Davis, “the Act would create a program that requires Internet and mail order sellers to collect and remit sales taxes to states that elect to participate in the federal program.” The Act was introduced in the Senate by Sen. Dick Durbin (D- Ill.), while its identical companion legislation was introduced in the House of Representatives by Congress-men John Conyers (D- Mich.) and Peter Welch (D-Vt.).
WFCA’s endorsement came after a unanimous vote by the organization’s executive committee. “This legislation is long overdue and aptly named,” said Jim Walters, WFCA chairman and president of Macco’s Floor Covering, Green Bay, Wis. “In some states, Internet sellers enjoy as much as a 10% price advantage over local brick-and-mortar retailers who are mandated by law to collect and remit sales tax to local and state governments. This legislation would make the playing field a little more level.”
WFCA views the legislation as helping small business interests. “This bill is crafted in such a way that it is not anti-Internet based companies, but does seek to address the fundamental unfairness in the marketplace as Internet commerce takes an ever increasing slice of the retail pie,” Davis said. “This is not a Republican or Democrat issue. It impacts all Americans. And it’s not a new tax. It’s one every purchaser is supposed to pay but isn’t. WFCA is joining coalitions to support this legislation and we are going to encourage everyone we can to back these bills and write their representatives in Washington to urge them to support their passage.”
According to Jeffrey King, partner in the Washington- based office of Cromwell & Moring, the Act would establish a governing board to implement the bill and to determine whether a state meets the standards for simplifying their sales tax rules and administrative requirements. “The proposed legislation does not create a new tax but creates a program for states to collect existing sales taxes on Internet and mail order sales that are shipped into the state.
“For a state to use the federal authority to collect sales taxes on Internet and mail order sales it will have to meet the standards for simplifying their sales tax rules and administrative requirements as set forth in the ‘Streamlined Sales and Use Tax Agreement’ as modified by the proposed Main Street Fairness Act,” he explained. “States that voluntarily enter the program and adequately simplify their tax systems should be authorized to collect taxes on sales of goods or services delivered in-state with-out regard to the location of the Internet and mail order seller. The Act would require the states to release consumers from tax remittance obligations to participate in the program.”
Under the proposed legislation, King noted, Internet and mail order sellers can elect to register with the “one stop” system covering all participating states or can register directly with each state—but these sellers are obligated to collect and then remit the sales taxes on all sales shipped to states participating in the program regardless of how they register. To compensate retailers for any startup administrative costs associated with collecting sales taxes, the governing board will establish compensation for all sellers required to collect sales taxes.
The Act would exempt small online and catalog retailers from having to collect sales tax, he added. “The threshold of what constitutes ‘small’ is not defined by the bill but will be set by a governing board established under the Act to oversee the program. Earlier legislative proposals to tax Internet sales had defined small as under $5 million in Internet/mail order sales per year. This may provide guidance on the definition of small retailer.”
The bill was introduced at the end of July and has not received any bipartisan support, King said. “The bill was characterized by some as ‘anti-Internet sales,’ yet Amazon.com and Sears Holdings both announced support for the legislation as it was introduced. While many changes can be expected in the drafting, the basic concept of the bill provides states with a means of requiring all companies that sell products into their state to collect sales taxes.
“Only through congressional action authorizing states to collect sales tax can the traditional brick-and-mortar stores compete fairly with out-of-state Internet and mail order companies,” he concluded. “It is key for all those interested in creating this level playing field to contact their congressmen and senators and request they sup- port this legislation. It is a vital piece of legislation in a time when states are facing budget crises and the brick-and-mortar stores, the backbone of America’s economy, are faced with declining sales and unfair com- petition from competitors that don’t collect sales taxes.”