• August 1, 2011 01:57am EST
• 14 Comments
Democrats Introduce Federal Bill to Collect Online Sales Tax
By Mark Hachman
http://www.pcmag.com/article2/0,2817,2389490,00.asp
A bill introduced Friday by Democrats in Congress would require a federal
framework for collecting sales tax from online retailers, essentially providing
guidelines for the states.
As it did during its earnings call, Amazon supported the "Main Street Fairness
Act," co-sponsored by Sen. Dick Durbin (D-IL), Sen. Tim Johnson (D-SD), and
Sen. Jack Reed (D-RI) as well as Reps. John Conyers (D-MI), Peter Welch (D-VT)
and Heath Schuler (D-NC) in the House. The bill was endorsed by Sears Roebuck &
Co., as well.
A collection of organizations opposed the bill, which they said would place an
unnecessary cost burden on small businesses. Durbin said, however, that small
businesses would be exempted from collecting online taxes, subject to the
governing board of the agreement.
eBay led the opposition, which was joined by the the Electronics Retailing
Association, the Computer and Communications Industry Association, TechNet, and
the National Taxpayers Union, among others.
"Consumers shouldn't have to face the burden of reporting all of their online
purchases," Durbin said in a statement. "Main Street retailers collect sales
taxes on behalf of consumers, why shouldn't online retailers do the same? In
2012, states across the country, including Illinois, are expected to lose as
much as $24 billion in uncollected state and local taxes on internet and
catalogue sales. From 2005 to 2010 the state of Illinois estimated it lost $153
million each year. The Main Street Fairness Act doesn't ask anyone to pay a
single penny more in taxes. Instead, it would help governors and mayors collect
taxes that are already owed."
The texts of the two pieces of legislation are now available online: the Senate
bill is here, and the House bill is here. A previous version of the Main Street
Fairness Act was introduced by Rep. William Delahunt (D-MA) in the last session
of Congress.
Although Amazon currently benefits from not having to charge sales tax - the
cost savings either factor in as pure profit, or as a price decrease that can
attract more buyers - Amazon has also said that it charges tax on more than
half of its business around the world.
"I think in terms of the sales tax issue in total, the way you should think
about it, we support a federal simplified approach, as we have for more than 10
years," Thomas J. Szkutak, the company's chief financial officer, told analysts
during the company's second-quarter earnings call. He reiterated that Amazon
thought that the tax issue was a "federal" one and that Amazon continued to
work through those issues.
Current law requires retailers which have a physical presence in the states,
known as a nexus, to charge sales tax; otherwise, consumers are obligated to
pay a "use tax," which they rarely do. In 2008, Amazon first began challenging
the law's interpretation, and fought 2008 and 2011 efforts by the State of New
York to tax digital goods. Amazon also severed ties with California retailers
in response to a new law which broadens the definition of a "nexus," the
condition by which sales tax is applied, to include affiliates.
"Introduction of your bill returns the discussion of interstate collection of
sales tax to Congress, which the Supreme Court says is the appropriate forum to
resolve the issue," Paul Misener, Amazon's vice president for global public
policy, wrote in a Friday letter to durbin. "Amazon looks forward to working
with you and your colleagues in Congress to help enact sales tax collection
legislation."
Durbin said that the Main Street Fairness Act is supported by the National
Governors' Association, National Conference on State Legislatures, Governing
Board of the Streamlined Sales and Use Tax Agreement, National Retail
Federation, International Council of Shopping Centers, Retail Industry Leaders
Association, National Association of Real Estate Investment Trusts, and
National Association of College Stores.
eBay, which represents a vast network of small businesses and individual
sellers, would presumably be forced to require each and every one to charge
sales tax.
But Rep. Welch also noted that brick-and-mortar shops are also being used as
display cases for products later bought online. "When a consumer can walk into
a store, try out a product and then go home and buy it online without paying
sales tax, Main Street businesses and downtowns lose," he said in a statement.
And that has been the basis of eBay acquisitions like RedLaser, which allows
users to scan a physical bar code on an item and then look for it more cheaply
online.
"A collection of state tax commissioners have again been able to get an
outdated Internet sales tax bill introduced in Congress, but we are confident
that it will be rejected because it would harm small Internet retailers," said
Brian Bieron, senior director, of federal government relations and global
public policy at eBay, in a statement. "Better policy is reflected by H.Res. 95
from Congressman Dan Lungren (R-CA) and Congresswoman Zoe Lofgren (D-CA) with
27 bipartisan co-sponsors, which says that Congress won't give states 'the
authority to impose unfair tax collecting requirements on small online
businesses.'"
"The giant retailers jockeying for new Internet sales taxes have national store
networks that they combine with their major online sales platforms, a business
model they know brings some tax collection duties, Bieron added. "Forcing small
businesses to take on the same costs and tax burdens as national retail
businesses is unrealistic, unfair and will unbalance the playing field between
giant retailers and small business retailers on the Internet."
Editor's Note: This story was updated at 8:50 AM to add the online locations of
the bills and also to correct a reference to a previous version of the Main
Street Fairness Act, which was introduced by Rep William Delahunt (D-MA) in the
previous session of Congress.
For more from Mark, follow him on Twitter @MarkHachman.
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