The push is on in Washington to enact an Internet sales tax.
Yesterday, the Senate voted 69-27 in favor of the Marketplace Fairness Act. The bill would give states the authority to force online retailers to collect appropriate state sales taxes on all transactions.
Right now, online retailers don’t have to collect state sales taxes if they don’t have a presence in the state where their customers live. The burden is on customers, who are supposed to pay the tax on those transactions themselves, Chris Morran at the Consumerist explains.
Supporters of the bill say the way the system works now is unfair to brick-and-mortar businesses. Since sales tax is not added automatically to many online purchases, it makes prices from online stores seem cheaper, according to the Retail Industry Leaders Association, which has dubbed the issue “E-Fairness.”
“A sale is a sale, whether it happens online or in a store. But for too long government has given some online retailers an advantage over their Main Street peers by allowing them to avoid collecting the sales tax owed on purchases made online,” RILA says in its position on the bills working their way through both houses.
The National Retail Federation also applauded the Senate’s action.
“Retailers compete for customers on many different levels, distribution channels and fronts, including service and selection, but they cannot compete on sales tax,” said the federation’s board chairman, Stephen I. Sadove. “Congress needs to address this sales tax disparity and allow retailers to compete freely and fairly. Retailers of all shapes, sizes and channels deserve a level playing field.”
NRF also created this video explaining E-Fairness.
Opponents of the Senate bill, such as the economic advocacy group R Street Institute, say it is poorly written and “misguided.”
“By wiping away geographic limits to state tax authority, the bill would impose serious burdens on Internet retail and undermine basic tax policy principles,” R Street Institute fellow Andrew Moylan said in a written statement.
The institute has even published a list of what it calls myths or misconceptions about the Marketplace Fairness Act.
Moylan said a more sensible approach would be “origin sourcing,” in which online retailers would be held to the same rules as brick-and-mortar stores, collecting taxes for their physical location rather than for where their customers are located.
A number of groups have joined R Street Institute against the bill, including Americans for Tax Reform, the Center for Freedom and Prosperity, Freedom Works, the Heartland Institute and Americans for Prosperity.
Montana Sen. Max Baucus has said he will not support such a law, which he says would force Montana businesses to “play tax collector for other states.”
“Small businesses need to focus their time on creating jobs, not playing tax collector for other states,” Baucus said in a written statement. “This bill is bad for Montana businesses, and I’m going to keep fighting to make sure it doesn’t become law.”
Baucus spoke against the bill in this video from the Senate floor posted to YouTube on April 22.
The Great Falls Tribune noted that Montana, Alaska, Delaware, New Hampshire and Oregon would not see any money coming in as a result of the bill because they don’t have sales taxes.
Sen. Jon Tester also opposed the bill, saying it was “insulting” that other states couldn’t manage their budgets “without reaching into the pockets of Montana’s businesses.”
“In Montana, our budget has a surplus because we’ve handled our money wisely,” Tester said in the Tribune. “We don’t have a sales tax and have twice voted against having one. This bill would impose new tax burdens on small businesses and create more bureaucracy and more accountants. It’s bad policy that will fundamentally alter the rights of states.”
The bill moves now to the House of Representatives, which is expected by many to be a tougher road than the bill’s swift passage through the Senate.
Montana’s sole representative in the House, Steve Daines, is expected to vote against his chamber’s version of the bill, MTN reports.