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.
