Online sales tax bill hits a potential firewall

"The special treatment of big online businesses at the expense of retailers on Main Street will soon be a thing of the past," said Bill Hughes of the Retail Industry Leaders Association. "The overwhelmingly bipartisan support for leveling the playing field is rare in today's political environment and paves the way for a level playing field once and for all."

Supporters say the bill is about fairness for local businesses that already collect sales taxes and for states that lose revenue. Opponents say the bill would impose complicated regulations on retailers and doesn't have enough protections for small businesses. Businesses with less than $1 million a year in online sales would be exempt.

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.

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 National Conference of State Legislatures estimates that states lost $23 billion last year because they couldn't collect taxes on out-of-state sales.

Anti-tax groups have labeled the bill a tax increase. But it gets support from many Senate Republicans who have pledged not to increase taxes. The bill's main sponsor is Sen. Mike Enzi, a conservative Republican from Wyoming. He has worked closely with Sen. Dick Durbin, a liberal Democrat from Illinois.

Under the bill, states that want to collect online sales taxes must provide free computer software to help retailers calculate the 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.

"Obviously, there's a lot of consumers out there that have been accustomed to not having to pay any taxes, believing that they don't have to pay any taxes," Womack said. "I totally understand that."

But, he added, "It's not a tax increase and states can easily employ the proper software for the people to pay. At the end of the day it becomes more or less a political decision, and I'm not real sure where the House is going to be on it."

Follow Stephen Ohlemacher on Twitter: http://twitter.com/stephenatap

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