SALT Strategies

The Marketplace Fairness Act Hearings – Why They Should Be On Your Radar

housejudiciary.1 300x111 300x111 - The Marketplace Fairness Act Hearings – Why They Should Be On Your RadarSince the Marketplace Fairness Act may expand any business’ sales and use tax registration, collection and remittance requirements into many additional states, every business, not only e-commerce retailers, should keenly monitor the MFA Hearings scheduled for this week in the House.

Recently the House Judiciary Committee rescheduled its hearings on Exploring Alternative Solutions on the Internet Sales Tax Issue to Wednesday March 12, 2014.  These hearings will address the numerous concerns arising from the Market Place Fairness Act of 2013.

As set forth in its statement addressing “What is the Marketplace Fairness Act of 2013?”, the MFA website offers the following:

The Marketplace Fairness Act grants states the authority to compel online and catalog retailers (“remote sellers”), no matter where they are located, to collect sales tax at the time of a transaction – exactly like local retailers are already required to do. However, there is a caveat: States are only granted this authority after they have simplified their sales tax laws.

In its present form, the MFA would require each “remote seller” (other than those that qualify for the MFA’s “small seller exception”) to potentially be subject to remote states’ sales tax provisionsdespite having no activities in such remote states.  In effect, the MFA could substantially limit the protection from sales tax nexus that the U.S. Supreme Court afforded businesses in Quill Corp. v. North Dakota, 504 U. S. 298 (1992).

The very fact that the House is considering Hearings exploring alternatives to the MFA is a significant and important accomplishment.  James Sutton, of Moffa, Gainor, & Sutton PA, is scheduled to be a witness at the Hearings. I have been following James’ comments on the MFA. His efforts to vet out concerns as well as identify possible alternatives to the MFA should be applauded and commended.

As a state and local tax practitioner, I appreciate and support his commitment to broaden the discussion of the MFA and look forward to his testimony at the hearings.  I agree with Mr. Sutton that the MFA, as presently constituted, may not be the answer.

The MFA appears to have been drafted in response to the state tax administrators’ concerns that states are losing sales and use tax revenue due to the states’ inability to assert sales tax nexus over “remote sellers.”

However, I have significant concerns that the adoption of the MFA, in its present form, will create potential extensive sales tax nexus ramifications for many businesses as well as further weaken the protection afforded businesses under Quill.  Therefore, these hearings warrant close attention.  We will continue to monitor the hearings and  update you on their progress.