“Main Street Fairness Act” Would Be Ineffective Without Membership in Streamlined Sales Tax Agreement


On July 29th, the proposed “Main Street Fairness Act” (MSFA) was introduced in the United States Senate (S. 1452) and House of Representatives (H.R. 2701). Subject to a “small seller” exception, the MSFA would allow qualifying states to require “remote sellers” (essentially internet-based and mail order sellers) to collect sales and use tax on “remote sales.” The potential impact of this legislation in Pennsylvania, however, is complicated not only by uncertainties relating to passage by Congress, but also by the uncertainty of whether and when Pennsylvania would agree to join the Streamlined Sales Tax Agreement, which would be a precondition for remote collection authority under the MSFA.?

Many “bricks and mortar” retailers in Pennsylvania support actions that would require remote sellers to collect tax. As a practical matter, many sales to PA customers by internet-based and mail order sellers escape state and local sales taxes in Pennsylvania. This gives remote sellers an effective price advantage over local retailers who not only collect sales and use taxes, but pay other local taxes and provide local employment. Of course, a purchaser from a remote seller is legally required to remit use tax directly to the Commonwealth on any untaxed purchases which would be subject to sales tax if purchased from an in-state vendor. Other than business taxpayers who are regularly audited, however, many taxpayers are either ignorant of their use tax obligation or simply ignore it.?

In the United States Supreme Court’s 1992 decision in Quill Corp. v. North Dakota, 504 U.S. 298, the Court ruled that a state cannot require a vendor to collect sales tax on sales to customers in that state unless the vendor has a physical presence in the state. This physical presence may consist of an office or other facility, visits by out-of-state based employees, or in-state activities on the company’s behalf by an agent or other representative of the company. However, unlike prior cases, this decision made clear that the United States Congress, under its Commerce Clause powers, could establish a different tax collection standard. The MSFA would do just that.

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