Last week, Representatives Jackie Speier (D-CA) and Steve Womack (R-AR) introduced the Marketplace Equity Act that would give states authority to compel online retailers to collect sales tax. The bill differs from the Main Street Fairness Act, an online sales tax bill introduced over the summer by Sen. Dick Durbin (D-IL), in that it would provide states with greater flexibility in how they craft their tax systems to conform with the law. The Main Street Fairness Act (S 1452), first proposed by Senate Majority Whip Richard Durbin (D-IL) would allow states to require many online vendors to collect state sales taxes, according to some federal budget analysts. Additionally, the Main Street Fairness Act would allow the 44 states that currently collect sales taxes to standardize their tax systems to require retailers to collect sales taxes already owed in the state. It is estimated that requiring the collection of state sales taxes on all online sales could provide $240 billion in additional revenue over the next 10 years.

Both bills carve out an exemption for small sellers. Under the Womack-Speier measure, a state has to exempt a firm from collecting sales tax if the firm has either less than $1 million in annual sales or has $100,000 or less in sales in the state in question. The Main Street Fairness Act does not specify an exemption but allows the threshold to be set by the Streamlined Sales Tax Project’s governing board.

Twenty-four states are members of the Streamlined Sales and Use Tax Agreement, which seeks to simplify and harmonize sales tax nationwide. In 1992, the Supreme Court stated that states could require retailers to collect sales tax only if they have a physical presence, such as stores or headquarters, in the state where the buyer lives.

Links: Summary of the Marketplace Equity Act of 2011, Streamlined Sales and Use Tax Agreement