• Maryland: Gas Tax Increase Passed, Indicating Anticipated Passage of Federal Marketplace Fairness Act
  • June 19, 2013 | Authors: David M. Kall; Susan Millradt McGlone
  • Law Firm: McDonald Hopkins LLC - Cleveland Office
  • On May 16, 2013, Maryland Governor Martin O’Malley signed into law H.B. 1515. The bill includes revisions to the state’s gas tax that will become effective on July 1, 2013. This law will replace the current flat gasoline tax rate of 23.5 cents per gallon to a rate that is indexed to increase with inflation. It also includes set future gas tax increases that are contingent on whether Congress passes the Marketplace Fairness Act of 2013 (the “Fairness Act”) or a similar act.

    The Fairness Act would allow states to tax out-of-state business’ remote sales. The passage of H.B. 1515 means that Maryland has joined the increasing number of states that are demonstrating their intentions to readily collect taxes on remote sales upon the potential enactment of the Fairness Act. In fact, the Maryland Legislature’s Fiscal and Policy Note on H.B. 1515 echoes the sentiment of many states regarding sales taxes on remote purchases:

    “[a]s the magnitude of online purchases has grown significantly, the inability of states and local jurisdictions to require remote sellers to collect sales tax has led to an erosion of state and local sales and use tax bases and also created an unlevel playing field for ‘brick and mortar’ businesses.”

    As many states face budget shortfalls, the Fairness Act is viewed as a ticket to help remedy future budget imbalances.

    Other recent state developments reflecting a hopeful outcome for the Marketplace Fairness Act

    Other states, in addition to Maryland, are passing legislation and making promises to their citizens in hopes that the Fairness Act will be enacted into federal law. For example, on May 15, 2013, Wisconsin Governor Scott Walker issued a letter to the state’s members of Congress stating that in the event the Marketplace Fairness Act becomes federal law he will use the additional revenue “to provide individual income tax relief [to] Wisconsin’s taxpayers.” Additionally, the Ohio Legislature is finalizing its budget bill, H.B. 59, which includes § 757.50, expressing “the intent of the General Assembly to enact conforming legislation upon the enactment of the federal ‘Marketplace Fairness’ legislation.” These states are anticipating, and even depending on, using the federal Fairness Act to help rescue or augment their state budgets.

    State Revenue and the Marketplace Fairness Act

    The Fairness Act was recently passed in the U.S. Senate and is currently undergoing fierce scrutiny in a Republican-controlled House of Representatives. In the event of the Fairness Act’s passage, Maryland state analysts project an increase of more than $200 million in revenue from the online sales taxes within the first few years of the law’s promulgation. A University of Tennessee study estimated states lost more than $12 billion in 2012 from forgone sales tax revenues. Make no mistake, all indications point to additional states passing legislation similar to what recently passed in Maryland, which indicates a willingness to collect sales tax revenue from out-of-state vendors in the event the Fairness Act (or similar legislation) is made into federal law.