Online shoppers could end up paying sales tax more often by the end of the year.
A Senate bill requiring online retailers to collect sales tax from customers may be tacked on the National Defense Authorization Act for 2013. Sen. Richard J. Durbin, Illinois Democrat, filed an amendment Friday to include the Marketplace Fairness Act in the spending bill with lawmakers voting as early as next week.
“We are optimistic that once the Marketplace Fairness Act is brought for a vote, it will have enough support to pass,” said Mr. Durbin’s spokeswoman, Christina Mulka.
The movement to enforce online sales taxes has gained traction this year with both parties as many state and local governments struggle to fill accounts and traditional retailers seek to level the commercial playing field.
“Sen. Durbin is focused on working with his colleagues to try to get a vote on the bill before the end of this year, whether as a stand-alone bill or part of a larger piece of legislation,” Ms. Mulka said. “They are keeping all options on the table at this point.”
The National Retail Federation, a proponent of the Marketplace Fairness Act, issued a statement in support of including it as an amendment to the defense bill.
“As the nature of retailing evolves and Internet sales become a more prominent portion of total retail sales, it is critical that sales tax collection requirements not discriminate,” NRF Senior Vice President David French said in a letter to senators. “The current collection disparity has tilted the competitive landscape against local stores, creating a crisis for brick-and-mortar retailers around the country.”
The House is working on a similar bill, the Marketplace Equity Act. If the Senate’s version passes first, it would go to the House for a vote. If passed there, then it would go to the president.
“The essence of the two bills are very much along the same flavor,” said Claire Burghoff, spokeswoman for Rep. Steve Womack, an Arkansas Republican who is sponsoring the House bill.
“We’ve just gained a lot of traction this year, and so we’re at a point where we can see it going through,” Ms. Burghoff added. “So having to reintroduce that legislation [next year] just takes some momentum out of the process that we have going for us right now.”
State governments see it as a way to fix their budget gaps. Studies show that collecting online sales tax would generate about $23 billion in revenue.
Currently, online shoppers are supposed to pay sales tax directly to the government, but few heed this requirement. The Marketplace Fairness Act would allow states to require that online retailers begin collecting sales tax from these customers, just like their brick-and-mortar peers are already doing.
In Quill v. North Dakota, the Supreme Court ruled in 1992 that states could not force companies located outside their boundaries to collect their taxes on long-distance sales. So e-commerce sites collect taxes only from customers who buy within the state where they are located. That could mean being headquartered in a state or having an office, distribution center, sales representatives or retail outlets there.
But proponents of online sales tax say this ruling occurred before the Internet was used widely as an e-commerce tool and should be reconsidered.
Furthermore, this has caused confusion for online retailers, who have to figure out which states they have a “physical presence” in and what the different tax rates are for the various districts.
Analysts say a federal law would lend some continuity to the situation.
The National Defense Authorization Act is sponsored by Sen. Carl Levin, a Michigan Democrat who chairs the armed services committee. His office decline to comment on whether the online sales tax bill would be included as an amendment.