February 16, 2013

Congress Takes on Online Sales Tax with Marketplace Fairness Act

The performance marketing industry has long anticipated a federal answer to the online sales tax/nexus issue – and Thursday that answer came a big step closer to being realized with the introduction of the Marketplace Fairness Act in both the U.S. House and Senate.

Sponsored by 53 U.S. senators and representatives, the proposed law is meant to address weaknesses in prior legislation designed to make it easier for states to collect sales taxes on online purchases.

The bill would give states the right to mandate sales tax collection by retailers, whether or not they have an in-state physical presence or nexus. Such a presence includes stores or distribution centers. If enacted, the law would overturn existing federal law that says states can mandate tax collection only by retailers with nexus in their states.

To date nine states (Arkansas, California, Connecticut, Georgia, Illinois, New York, North Carolina, Pennsylvania and Rhode Island) have passed affiliate nexus tax legislation. The nexus tax laws require out-of-state advertisers who exceed $10,000 in sales to consumers within the state via affiliate referrals to collect a sales tax. The nexus tax legislation has, in the words of the Performance Marketing Association, “devastated the incomes of 76,000 affiliate marketers.”

On Thursday PMA Executive Director Rebecca Madigan applauded the introduction of the Marketplace Fairness Act in a blog post, calling this development the “best Valentine’s present for the performance marketing industry.”

For more information about the Marketplace Fairness Act and what it would mean for the industry, read this piece by InternetRetailer.com.

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