Traditional retailers and cash-strapped states face a tough sell in the House as they lobby Congress to limit tax-free shopping on the Internet.
The Senate voted 69 to 27 Monday to pass a bill that empowers states to collect sales taxes from Internet purchases. Under the bill, states could require out-of-state retailers to collect sales taxes when they sell products over the Internet, in catalogs, and through radio and TV ads. The sales taxes would be sent to the states where a shopper lives.
Current law says states can only require retailers to collect sales taxes if the merchant has a physical presence in the state.
That means big retailers with stores all over the country like Wal-Mart, Best Buy and Target collect sales taxes when they sell goods over the Internet. But online retailers like eBay and Amazon don’t have to collect sales taxes, except in states where they have offices or distribution centers.
“This bill is about fairness,” said Sen. Mike Enzi, R-Wyo., the bill’s main sponsor in the Senate. “It’s about leveling the playing field between the brick and mortar and online companies and it’s about collecting a tax that’s already due. It’s not about raising taxes.”
The bill got bipartisan support in the Senate but faces opposition in the House, where some lawmakers regard it as a tax increase. Grover Norquist, the anti-tax advocate, and the conservative Heritage Foundation oppose the bill, and many Republicans have been wary of crossing them.
Supporters say the bill is not a tax increase. In many states, shoppers are required to pay unpaid sales tax when they file their state tax returns. However, states complain that few taxpayers comply.
Tuesday, House Speaker John Boehner, R-Ohio, declined to say whether the House would take up the bill, deferring to the House Judiciary Committee, which has jurisdiction over the legislation. Committee Chairman Bob Goodlatte, R-Va., said there are problems with the bill but he did not reject it outright.