Senate looks at state sales taxes for online purchases

The Senate Commerce Committee holds a hearing August 1 on the Marketplace Fairness Act (MFA), which would allow states to collect sales tax on all remote purchases and make it easier for merchants to determine each state's tax rate.

If passed, it would reverse the effects of a 1992 Supreme Court decision exempting many online retailers from collecting state sales taxes unless they had a physical presence in the state, such as a warehouse. The decision argued it was too tough for remote sellers to comply with different state tax rules, says David French, senior vice president of government relations for National Retail Federation, which supports the Senate bill and the House's Marketplace Equity Act (MEA). But as e-commerce has boomed and states continue to suffer from recession-era budget cuts, proponents of collecting a tax say it's unfair that brick-and-mortar and online retailers are competing on an "uneven playing field." Now technology makes it easier for merchants to follow the thousands of local tax codes.