Washington – States could force Internet retailers to collect sales taxes under a bill that overwhelmingly passed a test vote in the Senate Monday.
Subscribe to our Daily Roundup Email
Under current law, states can only require stores to collect sales taxes if the store has a physical presence in the state. As a result, many online sales are essentially tax-free, giving Internet retailers a big advantage over brick-and-mortar stores.
The bill would allow states to require online retailers to collect state and local sales taxes for purchases made over the Internet. The sales taxes would be sent to the states where shoppers live.
The Senate voted 74 to 20 to begin debating the bill. If that level of support continues, the Senate could pass the bill as early as this week.
Supporters say the bill is about fairness for businesses and lost revenue for states. Opponents say it would impose complicated regulations on retailers and doesn’t have enough protections for small businesses. Businesses with less than $1 million a year in online sales would be exempt.
“I believe it is important to level the playing field for all retailers,” said Sen. Mike Enzi, R-Wyo., the bill’s main sponsor. “We should not be subsidizing some taxpayers at the expense of others.”
In many states, shoppers are required to pay unpaid sales tax when they file their state income tax returns. However, states complain that few people comply.
“I do know about three people that comply with that,” Enzi said.
President Barack Obama supports the bill, but its fate is uncertain in the House, where some Republicans regard it as a tax increase. Heritage Action for America, the activist arm of the conservative Heritage Foundation, opposes the bill and will count the vote in its legislative scorecard.
Many of the nation’s governors — Republicans and Democrats — have been lobbying the federal government for years for the authority to collect sales taxes from online sales, said Dan Crippen, executive director of the National Governors Association. Those efforts intensified when state tax revenues took hit from the recession and the slow economic recovery.
“It’s a matter of equity for businesses,” Crippen said. “It’s a matter of revenue for states.”
The bill pits brick-and-mortar stores like Wal-Mart against online services such as eBay. The National Retail federation supports it. And Amazon.com, which initially fought efforts in some states to make it collect sales taxes, supports it, too.
“Amazon.com has long supported a simplified nationwide approach that is evenhandedly applied and applicable to all but the smallest volume sellers,” Paul Misener, Amazon’s vice president of global public policy said in a recent letter to senators.
On the other side, eBay has been rallying customers to oppose the bill.
“I hope you agree that imposing unnecessary tax burdens on small online businesses is a bad idea,” eBay president and CEO John Donahoe said in a letter to customers. “Join us in letting your Members of Congress know they should protect small online businesses, not potentially put them out of business.”
The bill is also opposed by senators from states that have no sales tax, including Sen. Max Baucus, D-Mont., and Sen. Kelly Ayotte, R-N.H.
“Supporters of this online sales tax bill are trying to muscle it through before senators find out how disastrous it would be for businesses in their states,” Ayotte said. “I will fight this power grab every step of the way to protect small online businesses in New Hampshire and across the nation.”
Baucus said the bill would require relatively small Internet retailers to comply with sales tax laws in thousands of jurisdictions.
“This legislation doesn’t help businesses expand and grow and hire more employees,” Baucus said. “Instead, it forces small businesses to hire expensive lawyers and accountants to deal with the burdensome paperwork and added complexity of tax rules and filings across multiple states.”
But Sen. Dick Durbin, D-Ill., said the bill requires participating states to make it relatively easy for Internet retailers to comply. States must provide free computer software to help retailers calculate sales taxes, based on where shoppers live. States must also establish a single entity to receive Internet sales tax revenue, so retailers don’t have to send them to individual counties or cities.
“We’re way beyond the quilt pen and leger days,” Durbin said. “Thanks to computers and thanks to software it is not that complex.”
Based on the comments of some of the Senators you wonder if they were out playing golf or doing on-line shopping during the Obamacare debates, oh there wasn’t any debate.
As much as we dislike the proposal, it makes sense. evens the playing field for brick and mortar merchants and produces tax revenue.
With the price of shipping and now taxes out will be better to see what you get And not have too ship van if its no good.
I have to admit it sux for us consumers, but its only fair since without it were hurting brick & mortar stores
What a load of bunk. The home states are receiving income tax from the seller. Every item he buys and sells and makes a profit on he pays taxes for – this should, and is built into the price of every item prior to you purchasing it. The states that are complaining are the ones with few or any sellers. In essence these states want to create “customs” – a duty that you would pay for merchandise entering their state. Which in turn slows sales.
Keep up this breakdown of the economy you idiot Senators and there won’t be any money left to pay your salaries.
The state making software is not a solution. Now businesses have 50 different incompatible software programs to deal with. Subjecting a business to 50 additional potential audits has to be stopped. The Federal government could create a national sales tax exchange, which has a set rule on sales tax (exactly which items are taxable, and a flat, consistent amount) and then distribute the money to the state it was shipped to. Only that exchange would have audit authority (and of course the states where the business has a nexus, as now). That would be reasonable.
This is long overdue. It makes zero sense to exempt internet only businesses from sales tax. Local businesses hire local people, who in turn pay all sorts of taxes. They also pay property taxes and all this is in addition to sales taxes. It clearly puts local stores at a significant disadvantage if only they have to pay sales tax.
As far as the issue of the complexity of collecting the taxes, this is an important issue but one that can be solved in a number of ways as others have suggested.
In other words, the only thing that stands between us and another confiscatory tax that will likely run small internet retailers out of business is the Republican House. And not for the first time.
There is a reason why Amazon.com supports this bill so strongly, it managed to bribe enough men in the Senate. Here is hoping that Representatives have more integrity than Senators.