Washington, D.C.—A Senate bill was introduced this week that would allow states to collect sales tax on purchases made over the Internet. It received immediate praise from the retailing industry and condemnation from the Direct Marketing Association.
The Marketplace Fairness Act
would bypass a two-decades-old prohibition on states collecting sales tax on catalog sales, and by extension e-commerce. States making certain tax-collection processes compatible with each other would be allowed to demand that e-commerce sites collect sales tax.
The bill was welcomed by the National Retail Federation as a means of equalizing competition between local businesses and Internet retailers. However, the DMA said in a statement, “This bill, even in the best of economic times, is bad policy as it interferes with the free flow of commerce among the states” and would hamper e-commerce.