The US Senate on Monday approved a proposed sales tax law that pits large retailers such as Walmart against online marketers such as Ebay.
The bill, which passed 69-27 late Monday, would allow states to collect state sales taxes from online retailers located outside their borders. States currently only collect those taxes if the online marketers have a physical presence such as a store or warehouse in the state.
To become law, the measure must now be taken up by the House of Representatives, where its prospects are unknown. House leaders haven't scheduled action on the measure, news reports said.
Supporters of the bill say the current situation gives online retailers with few or no stores or warehouses an unfair advantage.
Pushing for the bill are not only large retailers with physical stores and small brick-and-mortar stores, but also state governments that say they lose an estimated 23 billion dollars in state tax revenue annually due to internet purchases.
The issue has been debated since the advent of online retailing in the 1990s. The US Supreme Court ruled in 1992 that states didn't have the power to require out-of-state retailers to collect sales tax unless the retailer had a physical presence in that state.
The ruling gave online retailers an automatic price advantage, which helped spur rapid growth in internet commerce, but also hurt small stores across the country.
Over the years major online sellers such as Amazon and eBay led the fight against collecting sales tax, but news reports say Amazon now supports the legislation. As it expands to speed delivery, Amazon has a physical presence in more and more states, which means it will have to collect sales taxes anyway.
Walmart in most cases is required to collect sales taxes on its online sales because the large US retailer has a physical presence in all 50 states.
Other supporters of the bill say most states already require buyers to pay a so-called use tax whenever no tax is collected at an online checkout, but few people do so.
In addition to Ebay, opponents of the bill include a coalition of direct marketers, anti-tax groups and lawmakers from states without sales taxes, Bloomberg news said. These groups say if the bill becomes law, businesses may be subjected to multiple audits and higher compliance costs.
Under the proposed law, states would be able to require online sellers to collect sales tax if they have annual sales of at least 1 million in states where they don't have physical operations.
Among the opponents of the bill are the Tea Party, which Monday said the legislation "overturns the fundamental idea that states' taxing authority ends at their borders."
The Tea Party also said the bill would create a bureaucratic nightmare for retailers that have to collect the tax on behalf of the states.
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