The Direct Marketing Association (DMA), the American Catalog Mailers Association (ACMA), the Electronic Retailers Association (ERA), and e-commerce advocacy group NetChoice, have banded together to form the True Simplication of Taxation (TruST) Coalition, says Jerry Cerasale, the DMA’s SVP of government affairs.
The coalition was created in response to three bills currently circulating through Congress: the Main Street Fairness Act, the Marketplace Fairness Act, and the Marketplace Equity Act, the latter of which will be the subject of a House Judiciary Committee hearing on Tuesday, July 24.
The three bills were designed to close a loophole provided by the 1992 Supreme Court decision Quill Corporation v. North Dakota, in which the court ruled that a state cannot force vendors to impose a sales tax if those vendors are not located within that state. This has enabled online merchants such as Amazon to provide significant discounts on their wares, making it difficult for brick and mortars to compete.
The ultimate goal of the TruST Coalition is to simplify the state-by-state taxation process so that when online merchants are obliged to charge state taxes, they aren’t overwhelmed by the logistics and potential legal repercussions of this added responsibility, Cerasale says.
“You have to understand these are remote sellers without any political power in the state,” Cerasale says. “We think there should be one rate per state.” If, however, tax rates change on a state-by-state basis, Cerasale says he wants online marketers to have access to subsidized and certified software that automatically tallies the amount of state tax that can be charged to each transaction. Cerasale argues that for each online merchant to assume the responsibility of tallying state-by-state tax creates significant logistical, financial, and potential legal burdens.
“Every remote seller needs a 24/7 operation in their order-taking, fulfillment, and billing and inventory,” Cerasale says. “Some outside system on tax won’t mesh with that. It’s very costly to implement.”
Government-sanctioned software that determines state tax rates will shield online marketers from liability from both the state and consumers, he says. Moreover, TruST seeks to ensure that if there’s disagreement between marketers and state auditors, because, as Cerasale puts it, online marketers have “no political power in the state. Instead of going to state court, they should go to federal court. There should be only one nationwide audit, instead of being audited [on a state-by-state level].”
While the potentiality of states collecting sales tax from non-present vendors has been an issue for decades, TruST was only formed recently, Cerasale says, because of a “concerted effort from the big box retailers to get [legislation] done. They’re making a huge push lobbying and we need to garner our resources and pool [them] together.”
“It’s not like [the entities constituting TruST] have been at odds,” Cerasale says. “We just haven’t coordinated our efforts.”