Will the Marketplace Fairness Act Succeed in 2013?

The legislation fizzled last year as Congress became mired in the fiscal cliff debate. But advocates are hopeful for a different result this time.
by | March 20, 2013 AT 5:15 PM

Not much gets done in Washington these days, especially when the topic is tax and revenue. Yet a rare piece of tax-reform legislation is receiving bipartisan support in both chambers. And for the first time in years, it has a shot at becoming a law.

That legislation is the Marketplace Fairness Act (MFA). It gives states the authority to compel online and catalog retailers, no matter where they are located, to collect sales tax at the time of a transaction -- much like brick-and-mortar stores already do. State and local leaders have been clamoring for such legislation since at least 1992, when the Supreme Court ruled that retailers didn't have to collect sales tax when shipping to other states. "It's one [area] where we're really encouraged," says Salt Lake City Mayor Ralph Becker, who met with Republican Sen. Mike Enzi of Wyoming, one of the legislation's lead sponsors, in Washington, D.C. this March.

What makes 2013 so promising is that both the House and Senate versions of the legislation, introduced earlier this year, are identical. "It's pretty incredible," says Lars Etzkorn, program director for federal relations at the National League of Cities (NLC). "There's really no other piece of legislation where there's so much commonality coming out of the starting gate."

In the Senate, the legislation has 23 co-sponsors, and in the House, Republican Rep. Steve Womack of Arkansas, a three-term mayor, is joined by 47 others in support of it. There's growing speculation that the legislation could be included on the Senate budget resolution as a way of gauging legislative support for the proposal. It could also be folded into a larger piece of legislation dealing with varying aspects of tax reform. While some have suggested tax reform will be a big topic in 2013, it's unclear whether lawmakers will actually make a major push to take it up. Advocates have mixed feelings about seeing the act rolled into the broader tax-reform debate in the first place since "it's still not sure thing," says Neal Osten, director of the National Conference of State Legislatures' Washington, D.C., office.

MFA supporters have been especially focused on pitching the bill to Republicans skeptical of new taxes, framing the debate through a conservative lens: Broadening the tax base would ostensibly keep cities and states from having to raise their tax rates, they argue, and the bill could help states and localities without bailing them out with federal funds.

A key factor in growing support for the legislation has been an effort to shift the message around it. In the past, the bill was touted as a much needed way to help cash-strapped localities who were struggling to balance their budgets. That's still true. But today the bill is marketed as a state's rights issue: Who's Washington to tell a governor or a mayor what taxes to collect?

Osten says brick-and-mortar retailers and the associations representing them are also more engaged in the issue than they have been in the past. They've played a significant role in portraying the legislation as something that would help Main Street businesses compete on a more level playing field against Internet giants who offer lower prices in part because they don't have to collect sales taxes. The cause also has a new partner: Amazon.com.

The bill did receive bipartisan support last year as well, but was held up in committee as lawmakers focused instead on sequestration, the fiscal cliff and avoiding default.

NLC's Etzkorn says for MFA to be a success this year, it needs momentum. Right now, there aren't any scheduled hearings on the bill. Many believe that its best chance at becoming law will be hitching a ride on another piece of legislation moving through the legislative process. "They've always said all the options are on the table," says Enzi spokesman Daniel Head. "They really want to just get this done."