The new legislation will give states the right to collect the sales and use taxes they are owed under current law from out-of-state businesses or online retailers

The new legislation will give states the right to collect the sales and use taxes they are owed under current law from out-of-state businesses or online retailers

The US retail industry has welcomed renewed efforts by the US Congress to require online sellers to collect sales tax the same as local stores.

US Senators Mike Enzi, Dick Durbin, Lamar Alexander, and Heidi Heitkamp yesterday (27 April) introduced the Marketplace Fairness Act of 2017 – legislation that will give states the right to collect the sales and use taxes they are owed under current law from out-of-state businesses or online retailers.

Previously, a 1992 supreme court ruling meant US states could only force companies to collect sales tax from consumers if the company had a significant presence in the state in which the sale was made. Consequently, state and local government have complained for some time about dwindling sales tax revenue as more and more consumers do their shopping online.

Brick and mortar retailers are also affected, however, as they are often competing with out of state online retailers who don't have to collect sales tax and can therefore offer lower prices. 

"The Marketplace Fairness Act is about supporting jobs and services we have in our towns while ensuring states have the ability to collect taxes they are owed, if they choose to," Enzi said. 

"Right now, thousands of local brick and mortar businesses are forced to do business at a competitive disadvantage because they have to collect sales and use taxes and remote sellers do not. This legislation promotes internet fairness by putting Main Street businesses on a level playing field with online retailers. In 2013, the Senate passed this bill with bipartisan support. It's time to give states the right to enforce their own laws without having to get permission from Washington."

Durbin added: "By ensuring internet retailers meet the same tax responsibility as local businesses, the Marketplace Fairness Act creates a level playing field and gives small business owners – our nation's job creators – a real shot at success."

Also passed yesterday was the reintroduction of the Remote Transactions Parity Act, which had also been delayed. The two measures vary in details but both would allow states to require out-of-state sellers to collect sales tax regardless of whether they have a physical presence in a customer's state.

The National Retail Federation (NRF) welcomed yesterday's news. NRF senior vice president for government affairs, David French, said that with more states passing sales tax laws or going to court, pressure is building on Congress to finally address this issue.

"The states know they can't fix this on their own, but they agree with retailers that Congress has stalled for far too long. Online sellers should not continue to receive an unfair price advantage."

According to the NRF, states and local governments lose close to $25bn a year because of untaxed online sales.