Best Buy Supports Legislation to Tax Online Retailers

The Richfield-based company said a proposed federal law allowing states to require online merchants to collect sales tax would create a fair marketplace for all sellers.

Best Buy Company, Inc., on Wednesday announced its support of a new federal bill that would allow states to require online retailers to collect and remit sales taxes.

The Marketplace Equity Act-introduced Wednesday by Representative Steve Womack (R-Arkansas) and Representative Jackie Speier (D-California)-does not impose a national sales tax, but it would give each state the authority to require online retailers with no presence in the state to collect sales tax from residents who buy their products.

“Best Buy believes states should be granted theright to update their laws to reflect 21st century commerce, creating afair and competitive marketplace for all sellers to succeed and growjobs,” the Richfield-based elecronics retailer said in a statement. “Best Buy continues to support and encourage Congress to pass thislong-overdue reform to a collection system created before e-commerceexisted.”

A 1992 Supreme Court ruling says that retailers must collect sales taxes only in states where they have a physical presence. Many brick-and-mortar retailers argue that this gives an unfair advantage to online merchants such as, which now collect tax in only a few states.

While residents are required to self-report online purchases in their annual tax filings and pay state taxes on them, many aren't aware of that requirement and few actually do report purchases and pay what's owed.

Brian Steinhoff, president of the Minnesota Retailers Association, told Twin Cities Business several months ago that many of his more than 1,500 members are losing money because of the current system.

Many states, including Minnesota, are looking at redefining “nexus,” or physical presence, and closing the loophole that's allowing those taxes to go unpaid.

Governor Mark Dayton and several Minnesota legislators in March proposed a bill that would require all online merchants that promote their products through local Web sites or businesses to collect state sales tax on purchases made by Minnesota residents. The bill didn't pass during the 2011 legislative session.

In March, a representative of Performance Marketing Association, Inc.-a trade association that represents the interests of the performance marketing industry-told Twin Cities Business that the Minnesota bill, which was under consideration at the time, would put a large and unfair burden on out-of-state retailers and could cause them to stop buying ads on Minnesota Web sites.

But California passed similar legislation in July, while North Carolina and Rhode Island have previously passed laws that require out-of-state retailers to pay taxes on purchases that residents make through in-state affiliates.

Best Buy is Minnesota's third-largest public company based on revenue from its 2010 fiscal year, which totaled $49.7 billion. The company reported $50.3 billion in revenue for its most recently completed fiscal year.