Legal Matters: Proposed Marketplace Fairness Act Threatens Direct Marketers

On Nov. 9, 2011, a group of 10 senators from both sides of the aisle introduced the Marketplace Fairness Act, S.1832. On Oct. 13, 2011, a similar bipartisan bill was introduced in the House of Representatives called the Marketplace Equity Act.

For more than a quarter century, states have tried to convince Congress to enact legislation that would strip direct marketers of their constitutional protection from having to collect state sales taxes when delivering products to consumers in states where they have no physical presence such as retail stores, warehouses or salesmen. In landmark decisions in 1967 and again in 1992, the Supreme Court ruled that absent such an in-state physical presence — the Court referred to it as “nexus” — it would be unfair to require out-of-state retailers to collect taxes for state and local governments that provide no services to those companies in return.