UPDATED 09:00 EDT / FEBRUARY 14 2013

E-Commerce Taxation Finds New Life in Marketplace Fairness Act

The debate over the taxation of online purchases has begun again in congress.

The Marketplace Fairness Act will be introduced by Senator Dick Durbin (D-IL) and Republican Senators Mike Enzi (R-WY) and Lamar Alexander (R-TN).  The bill is expected to exempt from sales tax collection any merchant with $1 million in annual sales or less. This would be an increase from a prior cap of $500,000, in an effort to level the bill with previous versions introduced in the House of Representatives.

Those who support the move point out that in states with sales tax laws on the books, the tax is already owed, meaning that online shoppers are required to report untaxed purchases on their respective state returns.  Of course, not many do, and officials are complaining that they cannot realistically chase down this revenue.

While state and local governments cannot impose new taxes on online purchases as per the The Internet Tax Freedom Act (ITFA), which was renewed through November 1 of 2014, it does not prohibit them from enforcing existing tax laws pertaining to online retailers.

“This bill simply says that you have the right to decide whether you will collect state and local sales tax from all of the people who owe or from some of the people who owe,” said Senator Alexander in a prior speech to the Tennessee legislature.


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