Federal legislation that would allow states to make online retailers collect
sales taxes has bipartisan support in Congress and among state officials. It
even has the support of Amazon, by far the nation's largest online retailer,
in addition to backing from traditional retailers such as Wal-Mart. What it
doesn't have, it appears, is a chance to pass this year as part of any fiscal
cliff compromise.
The Hill, a publication that covers the federal government, reported
earlier this week that lawmakers probably won't vote on the Marketplace
Fairness Act, as the online tax legislation is known, before the 112th
Congress adjourns January 3. Supporters of the legislation have tried
unsuccessfully to attach it to various bills in recent weeks. Instead, it's
more likely to come up as part of a broader tax reform debate in the new
Congress next year.
That result would disappoint many state officials, who hope Washington
will change a policy under which retailers are generally required to collect
sales taxes only in states where they have a physical location. "The stars are
finally aligning in our favor for passage," Utah State Senator Curt Bramble, a
Republican, said earlier this month, according to the Huffington Post.
Requiring sales tax collections for online purchases would provide a
revenue boost for states to help them make up for the federal cutbacks that
would accompany a failure to reach a fiscal cliff compromise. Consumers are
already technically required to pay sales taxes on online purchases, but few
do when the sellers themselves don't collect them. While the exact amount is
uncertain, it's clear that billions of dollars a year are at stake for states.
That is why state officeholders, many long supportive of the concept,
have made the Marketplace Fairness Act a top priority lately. The Bond Buyer
reported that 600 state legislators pressured Congress on the issue in a
single day in early December, the first time the National Conference of State
Legislatures had ever dedicated a day of lobbying to one issue.
Meanwhile, Washington Governor Christine Gregoire, a Democrat, and
Tennessee Governor Bill Haslam, a Republican, sent a letter to key U.S.
senators earlier this month, asking them to act now rather than wait for
future action on tax reform. "Never before has the need for legislation to
grant states the authority to collect sales taxes on remote sales been
greater," the governors wrote. "The continued disparity between online
retailers and Main Street businesses is shuttering stores and undermining
state budgets."
So far, those arguments haven't been able to overcome congressional
inertia or win over ideological opposition. Many online retailers oppose the
change, as do some conservative Republicans. They argue that collecting the
tax would cause administrative headaches for businesses and would have the
practical effect of requiring consumers to pay more, even if the taxes already
are technically owed. S.T. Karnick, director of research for the Heartland
Institute, recently told McClatchy that the bill is "just another tax hike to
prop up big government."
Barring a surprise from Congress, the year will end where it began, with
Amazon striking state-by-state deals to collect the tax while awaiting federal
action. The retailer's latest agreement came in December with Massachusetts,
where it will start collecting sales taxes November 1, 2013.
Even in hailing that deal, though, Paul Misener, Amazon's vice president
of global public policy, expressed his dissatisfaction at the lack of
congressional action. "Federal legislation is the only way to level the
playing field for all sellers," Misener said in a statement, "the only way for
states to obtain more than a fraction of the sales tax revenue that is already
owed, and the only way to fully protect states' rights."
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Distributed by MCT Information Services
