Since the creation of the online marketplace more than twenty years ago, brick-and-mortar stores have experienced a steady drop in revenue thanks impart to ‘unfair’ tax laws. A Senate bill that looks to gain traction on Capitol Hill targets such ‘unfair’ practices by ‘leveling the playing field’ between online E-tailers and brick-and-mortar retailers.
Under the 1992 United States Supreme Court’s decision in Quill Corp. v. North Dakota, 504 U.S. 298, an online E-tailer is not obligated to collect sales tax for transactions conducted over the Internet unless the company has a “physical presence” in its customer’s state. This ruling created a huge burden for brick-and-mortar retailers because it became increasingly more difficult to compete in the marketplace since the online retailers can undercut brick-and-mortar stores by 5 to 10 percent because they are required by law to charge consumers sales tax.
The Marketplace and Internet Tax Fairness Act (MITFA), championed by senators Dick Durbin (D., Illinois) and Mike Enzi (R., Wyoming) will allow states to collect sales tax from E-tailers with annual sales exceeding $1 million. The MITFA, which is highly touted by the brick-and-mortar retail community would create fair competition in today’s marketplace and give brick-and-mortar retailers a flailing chance at increasing sales to respectable numbers.
The bad news for brick-and-mortar shops is that this is second go-around for MITFA. The first failed attempt did pass the Senate but was rejected by the House. This second attempt includes a new stipulation that the original did not – annual sales must exceed $1 million.
Congress is set to take a month-long recess in August, so for now MITFA has been placed on the back burner. As for brick-and-mortar retailers, their uphill battle against online E-tailers continues. And judging by the House’s prior decision, their fate resembles that of Sisyphus from Greek Mythology where he was condemned to ceaselessly push a boulder up a hill just to have it roll back down on him.