Senate weighs support for taxing Internet sales
Sens. Richard J. Durbin, Illinois Democrat, and Michael B. Enzi, Wyoming Republican, tested the support for their bipartisan “Marketplace Fairness Act” with an amendment to the budget resolution, which passed 75-24, during Friday’s marathon voting session on the Senate floor.
As part of debate over a spending blueprint, the vote on what has become known as the “Amazon tax” does not have the force of law and would not, in itself, require online retailers to collect sales tax on out-of-state purchases. But it does indicate increasing support on Capitol Hill for such a measure.
Online sales taxes are not new, but thus far, Internet retailers have been exempt from collecting it, much to the chagrin of their brick-and-mortar peers who enjoy no such exemption. Customers who shop online are supposed to pay the sales tax directly to the government, but many don’t realize this, so it goes uncollected.
Traditional retailers have lobbied strongly for the bill, because they say it would level the playing field, and state governments are backing it because they realize the revenues such taxes would bring in.
But opponents argue that states should not have the power to dictate to businesses outside of their jurisdiction, and that such taxes would pose a major crimp on Internet sales.
“As the retail industry evolves and digital commerce becomes a more prominent portion of total retail sales, it is critical that the tax laws not discriminate between similar businesses based on how their products are distributed,” wrote David French, senior vice president of government relations at the National Retail Federation, in a letter to the Senate.
The Enzi-Durbin amendment has 19 co-sponsors and, despite its non-binding nature, is a key indicator for what may happen when a vote on an actual law could be up later in the year.
The sponsors of the bill had said they may try to skip the committee process and go straight to the Senate floor for a vote, if they receive at least 60 votes, which did happen. But Senate Finance Committee Chairman Max Baucus, Montana Democrat, has said he wants any floor legislation to go through his committee first.
“I think this amendment is not yet ready,” Mr. Baucus said Thursday during debate of the amendment on the Senate floor. “It’s premature.”
Critics say the tax could also become a source of confusion for online businesses. There are nearly 10,000 jurisdictions around the country that would be eligible to require these Internet companies to collect taxes, each with its own tax code with different rates for different items.
Online businesses say they face heavy administrative costs keeping up with all the variations on rates.
State governments have also come out in support of collecting Internet sales taxes in recent years. The National Retail Federation estimates that states lose a combined $24 billion each year from uncollected sales taxes on Internet purchases.
Sen. Kelly Ayotte, New Hampshire Republican, said that is the crux of the debate: “Officials in cash-strapped states across the country [are] looking for new ways to plug their budget holes.”
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