Washington, D.C. -- The International Council of Shopping Centers released a statement that it is in support of the Marketplace Equity Act, which was introduced to Congress on Wednesday.
Currently, Internet retailers are required only to collect sales taxes in states where they have a physical presence, whether store, office, warehouse or DC. If enacted, the MEA would empower states to collect sales taxes already owed at the point of purchase from online retailers who may not have a physical nexus in the state, but sell millions of dollars in merchandise there.
“Closing the online sales tax loophole is not a partisan issue, but rather an issue of fairness,” said David B. Henry, ICSC chairman. “Each day, brick-and mortar retailers operate at a competitive disadvantage to remote sellers who don’t collect sales tax. The loophole was created by a 1992 Supreme Court decision at a time when the Internet was a mere shadow of what it is today. The MEA is a necessary step toward establishing a new, 21st century marketplace that considers both brick-and-mortar and online retailers, while protecting consumers who use and benefit from both.”
In a key component of the MEA, small businesses will be exempt from collecting sales taxes on internet transactions. As it stands now, most states already have what is known as a “use tax,” similar to a sales tax. When an online retailer fails to collect the sales tax, it falls to the consumer to report that tax directly to the state, which is often not done. This practice has given rise to the misperception of tax-free shopping online, and efforts to close the loophole are often mistaken for a new tax. The MEA is not a new tax; it simply gives states the power to collect revenue they are already owned at the point of purchase.