Senate passes Internet sales-tax bill

 

 

Measure faces tougher road in House

By Robert Schroeder, MarketWatch May 6, 2013, 7:32 p.m. EDT

WASHINGTON (MarketWatch) — Congress took a step toward ending tax-free shopping on the Internet on Monday, as the Senate passed a bill empowering states to collect sales tax for purchases made online.

 

But online shoppers won’t have to pay sales tax just yet. The measure — which got 69 yes votes and 27 no votes in the Senate — next goes to the House of Representatives, where anti-tax sentiment among many Republicans may make it more difficult to pass.

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Supporters of the legislation, named the Marketplace Fairness Act in the Senate, say it is about tax fairness and that it isn’t a tax increase. Read Q&A with National Retail Federation tax expert.

“Some have said: ‘Well, it’s a new tax.’ Of course it’s not,” said Tennessee Republican Sen. Lamar Alexander. “This is a tax that everybody owes but only some people pay.”



Opponents claim it amounts to a national Internet sales tax and imposes burdensome compliance costs on small businesses.

“I fear that what we’re going to do is crush a lot of these start-ups,” said Sen. Ron Wyden, an Oregon Democrat.

The legislation has pitted retailers including Wal-Mart Stores Inc. and Amazon.com Inc., a onetime opponent, against critics like eBay Inc. and anti-tax advocates.

The Senate bill would exempt businesses with less than $1 million in online sales, but eBay wants to raise that small-business exemption to firms with less than $10 million in sales.

“EBay will continue to focus on bringing greater balance to the legislation by protecting small businesses with less than $10 million in sales or fewer than 50 employees,” Brian Bieron, the company’s senior director of global public policy, said in a statement on Monday night.

States can now only require retailers to collect sales taxes if they have some physical presence in the state, like a store or a warehouse.

In arguing that it is not a tax increase, the bill’s supporters point out that online shoppers in many states are already required to pay such sales taxes when they file their state income-tax returns. Few do, however. Last year, states lost out on $23 billion by not collecting taxes on Internet sales, according to a University of Tennessee study.

In the House, Rep. Steve Womack, an Arkansas Republican whose district is home to Wal-Mart’s headquarters, is taking the lead on the issue. Womack told The Wall Street Journal that it is “probably more complicated in the House,” citing “a lot of political difficulty getting through the fog of it looking like a tax increase.”

 

Meanwhile, Rep. Bob Goodlatte of Virginia, who chairs the Judiciary Committee which the bill would go through, has raised concerns about the complexity of complying with the bill.
“I understand the concerns of retailers on this issue,” he said in a statement. “Brick-and-mortar retailers must compete with Internet companies that do not have the same sales-tax-collection responsibilities,” Goodlatte said.

“All of that being said, I do not believe legislation like the Marketplace Fairness Act is sufficiently simplified yet. While it attempts to make tax collection simpler, it still has a long way to go,” he said.

Robert Schroeder is a reporter for MarketWatch in Washington. Follow him on Twitter @mktwrobs.