After more than 10 years of legislative efforts by state and local government officials and traditional retailers, the U.S. Senate passed the Marketplace Fairness Act of 2013. What does this mean for retailers, states and customers?

First of all, this bill would allow a state to require certain remote sellers to collect sales and use tax on sales made to customers in the state. States that are members of the Streamlined Sales and Use Tax Agreement (SST) would automatically be granted this authority. States that are not SST members would be required to implement simplification requirements. The bill provides an exception for businesses with annual remote sales of $1 million or less.

Looking back at the 1992 U.S. Supreme Court's decision on Quill Corp vs. North Dakota, 504 U.S. 298, a state cannot compel a seller to collect the state's tax unless the seller has a physical presence in the state. In the Quill opinion, the Court cited an estimated $3.2 billion in lost state revenue in 1992, as a result of states not collecting tax on remote sales.

Fast forward to 2012 and the National Conference of State Legislators estimates that states collectively lost $23 billion in revenue from uncollected sales tax for the year. Proponents of the Marketplace Fairness Act of 2013 range from local government officials to Democratic and Republican members of Congress, large brick-and-mortar retailers, numerous retail trade associations, various labor unions, and state governors from both parties. Even Amazon.com is on board. While proponents of the Act argue that the physical presence restriction provides Internet sellers with an unfair advantage, by allowing them to essentially sell an item at a lower price than a store, opponents of the Act say it will adversely impact jobs and place an unreasonable compliance burden on small online businesses.