Main Street Fairness Act and Internet Sales Taxes

main street fairness act

Is the Main Street Fairness Act really fair?

What is the Main Street Fairness Act?

The Main Street Fairness Act is a bill sponsored by Illinois Senator Dick Durbin that would change the dynamic of buying products over the internet if passed.

As it is now, internet sales organizations like Amazon.com generally are not required to charge sales tax for products sold by their website if that internet company does not have a ‘brick and mortar’ physical building in the state. This is consistent with a 1992 U.S. Supreme Court decision concerning mail order companies.  However, if the Main Street Fairness Act were passed, this would all change, assuming the Supreme Court would uphold the law when challenged.

Why do some want to pass the Main Street Fairness Act?

Those in government, including Senator Durbin, feel that the Main Street Fairness Act is necessary to hold online retailers to the same standards non-online retailers are held to. For example, Amazon.com is able to charge less than other retailers because it is exempt from having to charge sales tax for purchases from its website. Some government officials argue that this competitive advantage was at one time necessary to stimulate fledgling internet companies, but feel that those companies, some of the largest in the world today, no longer need special tax exemptions.

Instead of damaging the now incredibly productive internet companies, Senator Durbin’s bill is said to simply hold the internet to the same standards of taxation all other companies are held to. Support for the Main Street Fairness Act might be garnered when Americans realize that many other nations tax purchases of online products. In these tough economic times, some government officials feel that the Main Street Fairness Act could help stimulate the economy as funding for government programs could be bolstered by the increased revenue generated by the new tax.

Some brick-and-mortar retailers want to handicap their online competitors by passing the Main Street Fairness Act and similar Internet sales tax laws at the state level. They have front groups that lobby on their behalf in the interest of “fairness,” such as the Alliance for Main Street Fairness.

Why are some people opposed to the Main Street Fairness Act?

Anti-tax groups, internet companies, and consumers have all expressed their disapproval of the Main Street Fairness Act. These groups claim that it is not fair to force an internet company to charge taxes especially since most internet companies do not have set locations in the particular states that would levy taxes against the companies. It is the responsibility of out-of-state clients to pay any taxes to their state of residence instead of having the online company become tax collector for thousands of state and municipal government bodies.

People opposed to the Main Street Fairness Act stress that much of the growth the United States has recently experienced has resulted from the fact that the internet has remained relatively immune from restricting taxes and regulations. These groups further tout that instead of bolstering the economy, the Main Street Fairness Act would instead stifle growth. By forcing internet companies to charge taxes, it has been argued, prices of their goods will increase, and people will be less able to buy things over the internet. They further argue that while the government would earn more in tax revenue, that money would be better spent if it were in the private hands of individuals rather than spent on government programs.

One thing is clear. If the Main Street Fairness Act becomes federal law, it will fundamentally change e-commerce.

Author Mike Young, Esq.

Mike Young has been practicing business and technology law since 1994 and is an angel investor in startups. He's been an entrepreneur since 1988. To get legal help from Attorney Young, click here now or call 214-546-4247 to schedule a phone consultation.

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