Today, just one and a half months before California's AB 155 is set to take effect on September 15, the House Judiciary Committee held a hearing on the Marketplace Equity Act which would supersede the state-level initiative. AB 155 was passed to require large, out-of-state retailers, including, Amazon.com, to collect sales taxes on Internet purchases by California customers which would help fund California's state government. The Marketplace Equity Act would enable all 50 states to require online retailers to collect sales tax, protecting funding for state governments and ensuring local businesses don't operate at a competitive disadvantage by charging a sales tax. Congresswoman Judy Chu (CA-32), a cosponsor of the Marketplace Equity Act, released the following statement:
"Before I came to Congress, I served on the California Board of Equalization -- the nation's only elected tax board. I can attest to the dramatic decline of sales tax revenue due to the increase in online sales. The inability to collect this revenue will cost California $1.9 billion this year, at a time when our state is facing the potential of 6.1 billion in "trigger" cuts if tax measures on the ballot fail in November. Most of these cuts will be absorbed by K--12 and higher education, which is simply unacceptable.
"I was glad to see the House Judiciary Committee hold a hearing on the Marketplace Equity Act that will ensure the state of California can collect sales tax from remote sellers, including Amazon and other online retailers. I am fighting to get this bipartisan bill to the House floor as soon as possible."
The Marketplace Equity Act would help safeguard states' ability to collect use taxes currently owed by state residents in 45 states. This bill will also protect local businesses from unfair competitive advantages currently enjoyed by online retailers who don't have to charge a sales tax to many customers. Online retailers have grown rapidly in popularity, presenting a challenge for state governments, whose revenues have taken a dramatic dive as consumers increasingly buy from online stores who do not collect sales tax.