Tax-Free Internet Shopping Jeopardized by Bill

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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 a 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 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 Commerce Department estimates.

The bill pits brick-and-mortar stores like Wal-Mart against online services such as eBay. Amazon.com, which initially fought efforts in some states to make it collect sales taxes, supports it too. Amazon and Best Buy have joined a group of retailers called the Marketplace Fairness Coalition to lobby on behalf of the bill.

“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 Sens. Max Baucus, D-Mont., and Ron Wyden, D-Ore.

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 quill pen and ledger days,” Durbin said. “Thanks to computers and thanks to software it is not that complex.”

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