Quantcast
Get breaking news alerts via email

Click here to manage your alerts
FILE - In this Oct. 18, 2010 file photo, an Amazon.com package is prepared for shipment by a United Parcel Service driver in Palo Alto, Calif. (AP Photo/Paul Sakuma, File)
Senate passes bill letting states tax online sales

The Associated Press

First Published May 06 2013 05:05 pm • Last Updated May 07 2013 10:18 am

Washington • The Senate sided with traditional retailers and financially strapped state and local governments Monday by passing a bill that would widely subject online shopping — for many a largely tax-free frontier — to state sales taxes.

The Senate passed the bill by a vote of 69 to 27, getting support from Republicans and Democrats alike. But opposition from some conservatives who view it as a tax increase will make it a tougher sell in the House. President Barack Obama has conveyed his support for the measure.

Join the Discussion
Post a Comment

Under current law, states can only require retailers to collect sales taxes if the store has a physical presence in the state.

That means big retailers with stores all over the country like Wal-Mart, Best Buy and Target collect sales taxes when they sell goods over the Internet. But online retailers like eBay and Amazon don’t have to collect sales taxes, except in states where they have offices or distribution centers.

As a result, many online sales are tax-free, giving Internet retailers an advantage over brick-and-mortar stores.

"We ought to have a structure in place in the states that treats all retail the same," said Matthew Shay, president and CEO of the National Retail Federation. "Small retailers are collecting (sales tax) on the first dollar of any sale they make, and it’s only fair that other retailers who are selling to those same customers the same product have those same obligations."

The bill would empower states to require businesses to collect taxes for products they sell on the Internet, in catalogs and through radio and TV ads. Under the legislation, the sales taxes would be sent to the state where the shopper lives.

Supporters say the current tax disparity is turning some traditional stores into showrooms, where shoppers pick out items they like, then buy them on the Internet to avoid sales taxes.

"It’s about the way commerce has changed in America," said Sen. Dick Durbin, D-Ill. "Bookstores, stores that sell running shoes, bicycles and appliances are at a distinct disadvantage. They’ve become showrooms."

Internet giant eBay is leading the fight against the bill, along with lawmakers from states with no sales tax and several prominent anti-tax groups. The bill’s opponents say it would put an expensive obligation on small businesses because they are not as equipped as national merchandisers to collect and remit sales taxes at the multitude of state rates.


story continues below
story continues below

"Giant retailers have a requirement to collect sales taxes nationwide because they have physical presence nationwide," eBay president John Donahoe wrote in an online column over the weekend. "Likewise, today small retail stores and online retailers collect sales taxes for the one state where they are located. That’s a fair requirement."

"If the bill passes, small online businesses would have the same tax compliance obligations and face the same enforcement risks as giant retailers, despite the fact that they are usually located in just one state."

Businesses with less than $1 million in online sales would be exempt. EBay wants to exempt businesses with up to $10 million in sales or fewer than 50 employees.

Some states have sales taxes as high as 7 percent, plus city and county taxes that can push the combined rate even higher. For example, the combined state and local sales tax is 9 percent in Los Angeles and 9.25 percent in Chicago. In New York City, it’s 8.5 percent and in Richmond, Va., 5 percent. In many states, shoppers are already required to pay unpaid sales tax when they file their state income tax returns. However, states complain that few taxpayers comply.

Many governors — Republicans and Democrats — have been lobbying the federal government for years for the authority to collect sales taxes from online sales.

The issue is getting bigger for states as more people make purchases online. Last year, Internet sales in the U.S. totaled $226 billion, up nearly 16 percent from the previous year, according to government estimates.

States lost a total of $23 billion last year because they couldn’t collect taxes on out-of-state sales, according to a study done for the National Conference of State Legislatures, which has lobbied for the bill. About half of that was lost from Internet sales; half from purchases made through catalogs, mail orders and telephone orders, the study said.

Supporters say the bill makes 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 it to individual counties or cities.

Opponents worry the bill would give states too much power to reach across state lines to enforce their tax laws. States could audit out-of-state businesses, impose liens on their property and, ultimately, sue them in state court.

In the Senate, lawmakers from three states without sales taxes are leading the opposition: Montana, New Hampshire and Oregon. They argue that businesses based in their states should not have to collect taxes for other states.

Delaware also has no sales tax, though Delaware’s two senators support the bill.

Next Page >


Copyright 2014 The Salt Lake Tribune. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Top Reader Comments Read All Comments Post a Comment
Click here to read all comments   Click here to post a comment


About Reader Comments


Reader comments on sltrib.com are the opinions of the writer, not The Salt Lake Tribune. We will delete comments containing obscenities, personal attacks and inappropriate or offensive remarks. Flagrant or repeat violators will be banned. If you see an objectionable comment, please alert us by clicking the arrow on the upper right side of the comment and selecting "Flag comment as inappropriate". If you've recently registered with Disqus or aren't seeing your comments immediately, you may need to verify your email address. To do so, visit disqus.com/account.
See more about comments here.
Staying Connected
Videos
Jobs
Contests and Promotions
  • Search Obituaries
  • Place an Obituary

  • Search Cars
  • Search Homes
  • Search Jobs
  • Search Marketplace
  • Search Legal Notices

  • Other Services
  • Advertise With Us
  • Subscribe to the Newspaper
  • Access your e-Edition
  • Frequently Asked Questions
  • Contact a newsroom staff member
  • Access the Trib Archives
  • Privacy Policy
  • Missing your paper? Need to place your paper on vacation hold? For this and any other subscription related needs, click here or call 801.204.6100.