New legislation introduced at the Arizona Capitol Wednesday could change the state’s “unfair tax code” and make online retailers subject to Arizona sales tax.

Currently, Arizona law only requires retailers with a physical presence in the state to pay sales tax, but House Bill 2702 would require out-of-state retailers and online marketplace facilitators to collect and remit sales tax on all products.

The bill is meant to be Arizona’s answer to the U.S. Supreme Court’s decision in the South Dakota v. Wayfair case last summer, which overturned a landmark precedent in the e-commerce sales tax debate. Now states can collect sales tax from companies selling products to residents online, even if the retailer isn’t based there.

Nationally, Arizona is one of just eight states with a sales tax that hasn’t changed their laws to reflect the Supreme Court ruling.

“Retail is all about competition, but it’s wrong that Arizona law places my local business at a disadvantage with online sellers in other states,” said John Arterburn, owner of Pinnacle Peak Ace Hardware, in a statement. “This important legislation will level the playing field for Arizona retailers and small businesses like mine.”

The bill was crafted by a group called Arizonans for Main Street Fairness, which is made up of a number of retailers, lobbying groups and local governments including the Arizona Retailers Association; Arizona Ace Hardware locations; Walmart; Amazon; Target; Changing Hands Bookstore; Walgreens; Almond Brothers; Global Arts Gallery; International Council of Shopping Centers; League of Arizona Cities & Towns; and County Supervisors Association of Arizona.

“With online shopping consuming an ever-larger proportion of consumer dollars, the unfairness of Arizona’s existing tax code is putting at risk local retailers, small businesses and Arizona jobs,” said Michelle Ahlmer, executive director of the Arizona Retailers Association. “HB 2702 is a critical opportunity for Arizona to join the vast majority of states that have already taken action to correct this inequity.”

The bill was introduced by Rep. Ben Toma, a Republican from Peoria. It has 24 co-sponsors, including 14 Republicans and 10 Democrats.

By Brandon Brown – Reporter, Phoenix Business Journal