Online sales tax bill hits a potential firewall
A bill aimed at collecting sales tax for online goods has cleared the Senate. However, the House will prove to be a problem as many see the bill as a tax increase – something many Republicans pledged they would not do.
A bill to require Internet shoppers to pay sales taxes for online purchases may be cruising through the Senate but it will soon hit a roadblock in the House.Skip to next paragraph
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"There's a lot of political difficulty getting through the fog of it looking like a tax increase," said Rep. Steve Womack, R-Ark., one of the main sponsors of the bill in the House.
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The bill would empower states to reach outside their borders and compel online retailers to collect state and local sales taxes for purchases made over the Internet. Under the bill, the sales taxes would be sent to the states where a shopper lives.
Under current law, states can only require stores to collect sales taxes if the store has a physical presence in the state. As a result, many online sales are essentially tax-free, giving Internet retailers an advantage over brick-and-mortar stores.
Womack says the bill is not a tax increase. Instead, he says, it simply gives states a mechanism to enforce current taxes.
In many states, shoppers are required to pay unpaid sales taxes when they file state tax returns. But governors complain that few people comply.
The Senate voted 63-30 Thursday to end debate on the bill, though senators delayed a final vote on passage until May 6, when they return from a weeklong vacation. Opponents hope senators hear from angry constituents over the next week, but they acknowledged they have a steep hill to climb to defeat the bill in the Senate.
President Barack Obama supports the bill.
Senate Democratic leaders wanted to finish work on the bill this week, before leaving town for the recess. But they were blocked by a handful of senators from states without sales taxes.
"I think it's going to be interesting for senators to get a response from constituents over this upcoming week," said Sen. Ron Wyden, D-Ore. "I'm not sure that the country knows that something like this coerces businesses all around America to collect other people's sales taxes."
The bill pits brick-and-mortar stores like Wal-Mart against online services such as eBay. The National Retail Federation supports it. And Amazon.com, which initially fought efforts in some states to make it collect sales taxes, supports it, too.
Retailers who have lobbied in favor of the bill celebrated Thursday's vote.