Tennessee’s senators applauded beginning the process for debating the Marketplace Fairness Act Monday, which was approved in a 74-20 Senate vote.
The bill, which has been long-backed by co-sponsor Sen. Lamar Alexander, would allow states to decide whether to tax online retail sales from companies that don’t have a brick-and-mortar presence within a state’s borders. The measure would impact sales from online corporate giants such as Amazon and eBay, which offer differing takes on the bill.
Although debate on the legislation is expected to continue throughout the week, both Alexander and Sen. Bob Corker issued statements following Monday’s vote. Alexander said the bill’s purpose could be simply boiled down to two words-states’ rights.
“We ought to support states’ rights by letting Tennessee and other states decide whether they want to collect taxes that are already owed and how to treat businesses fairly in the marketplace,” Alexander said. “Tennessee wants to avoid a state income tax and treat businesses fairly in the marketplace, and it shouldn’t have to play ‘Mother, May I?’ with the federal government to do so.”
Under current law, customers are supposed to voluntarily pay state sales tax from online transactions. But the majority of purchasers don’t, and follow-ups on the purchases are rarely conducted by federal administrators.
Corker said he hoped the legislation would help “level the playing field” between businesses that can claim a price advantage by not having to collect sales tax on purchases that occur in other states and on-the-ground businesses that are forced to pay.
“I think most Tennesseans would agree that we’re fortunate to not have a state income tax, and to help ensure that remains the case, it’s important our sales tax system works,” Corker said. “This is a states’ rights bill that gives states like Tennessee the ability to enforce existing state tax laws and collect sales taxes on online purchases if they choose.”
Reaction to the bill has been substantial.
Online retailers, such as eBay, have urged users to lobby against the Marketplace Fairness Act, saying it would do harm to smaller online retailers who rely on the current structure to operate their businesses successfully. Others, including Amazon, have endorsed the bill and made agreements in states such as Tennessee to begin collecting tax in 2014 if an agreement can’t be brokered at the federal level.
The current bill includes an exemption for retailers who report less than $1 million in sales annually.
Last year, Gov. Bill Haslam traveled to Washington, D.C., to testify before a congressional committee in support of the proposal. Haslam estimated Tennessee forgoes $400 million in sales tax revenue annually because of the loophole.
Should the legislation be approved in the Senate, it would move to the House of Representatives, where its fate is more uncertain. On Monday, the bill received a ringing endorsement from the White House.
Jay Carney, press secretary for the White House, channeled President Barack Obama’s support for the proposal in remarks made Monday.
“We have heard overwhelmingly from governors, mayors and the business community on the need for federal legislation to level the playing field for our businesses and address sales tax fairness,” Carney said in a report from D.C. newspaper The Hill.