Legislation requiring online retailers to collect sales tax, which is poised to pass the Senate this week, could bring about a change in Maryland’s newly adopted gas-tax increase.
The state law, approved by the Maryland General Assembly in March, adds a sales tax of up to 5 percent on the wholesale price of gasoline and indexes the current 23.5-cent excise tax to inflation.
The sales tax increases incrementally, starting with 1 percent on July 1, increasing to 2 percent on Jan. 1, 2015, and 3 percent on July 1, 2015, resulting in an estimated 12 cents per gallon added to the price at the pump, according to the Maryland Department of Transportation.
But if the federal Marketplace Fairness Act — which would feed some of the new sales-tax revenue into Maryland’s Transportation Trust Fund — isn’t adopted, the sales tax on gasoline will ultimately increase to 5 percent in 2016, adding another estimated 7 cents per gallon to the price at the pump, according to MDOT.
The federal bill is expected to win approval in the U.S. Senate, where it passed 74-23 in a test vote Wednesday, but faced more resistance in the Republican-controlled House of Representatives.
If the act passes, it will help level the playing field of Maryland brick-and-mortar stores, which can have difficulty competing with online retailers that can offer a lower overall price by not collecting sales tax, said Patrick Donoho, president of the Maryland Retailers Association.
His association supported similar, state-level legislation that died in the General Assembly this year.
The federal law could bring Maryland about $200 million in extra tax revenue, Donoho said.