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Government, Politics & Issues

Senate approves internet tax bill; opponents focus on House

This article first appeared in the St. Louis Beacon: The Senate’s approval of a “marketplace fairness” bill to make it easier for states to collect taxes on internet sales now shifts the focus to the U.S. House and – ultimately – to states such as Missouri that don’t enforce their existing internet sales taxes.

“A solid majority of the Senate stood up for small business today,” said U.S. Sen. Dick Durbin, D-Ill., after the vote late Monday. “I think the support in the House will be similar if the leadership practices what they preach and calls this bill for a vote.”

But neither U.S. Reps. William Lacy Clay, D-St. Louis, nor Ann Wagner, R-Ballwin, have yet to announce a public position on internet taxes, spokesmen say. They are waiting for House leaders to decide whether to take up the amended Senate bill or to develop a separate approach.

In the Senate’s 69-27 vote to pass the marketplace fairness bill, Durbin – a prime sponsor – was joined in supporting the legislation by U.S. Sens. Claire McCaskill, D-Mo, and Roy Blunt, R-Mo. U.S. Sen. Mark Kirk, R-Ill., voted no.

“This bill will help to level the playing field for Main Street retailers in Missouri and across America,” said Blunt, a GOP cosponsor of the bill, after the vote. “It does not create a new tax. It simply allows states to collect sales taxes they are already owed from out-of-state and online businesses, if they choose to do so.”

Blunt said the bill gives states the option to collect sales taxes they are owed from online retailers and out-of-state businesses through a new, simplified tax system. While Missouri and many other states have internet sales tax laws on the books, most taxpayers ignore the taxes, which are difficult to enforce. Blunt also said the Senate bill includes an exemption for online sellers who generate $1 million or less in annual gross receipts.

Durbin agreed that the “long-overdue legislation … will give much needed support to local businesses around the country.” But the legislation, if passed by the House and signed by the president, would require most states – including Missouri and Illinois – to modify and simplify their existing internet sales tax laws to conform to the federal legislation’s standards.

McCaskill said last month that the legislation would “provide the framework of fairness” for the state’s brick-and-mortar retailers to compete with outstate internet retailers that now avoid imposing taxes. “But ultimately the decision on this lies with the Missouri legislature."

In a separate session with reporters, Blunt agreed that the Senate bill “does provide the tools that the [Missouri] legislature needs” to modify the existing – but unenforced – Missouri state tax on internet purchases. He added, however, that the legislature “can still decide, if they want, not to be part of this system. But I think that's unlikely that Missouri would decide that.”

Last year, internet sales in this country were about $226 billion, a 16 percent increase from the previous year, the Commerce Department has estimated. The National Conference of State Legislatures has estimated that states lost $23 billion last year because they couldn't collect taxes on out-of-state sales. And the Truman School of Public Affairs at the University of Missouri at Columbia estimated last year that the state has lost about $468 million a year in tax revenue from online sales during the past decade.

One of the biggest internet retailers, Amazon.com, did not actively oppose the Senate bill. Amazon already has started collecting tax in some big states, including California, Pennsylvania and Texas. But eBay and other big internet firms oppose the bill.

Some analysts say brick-and-mortar retailers may not get as much benefit as expected from a more consistent internet sales tax regime. “Closing the loophole won’t level the playing field,” business analyst Sucharita Mulpuru of Forrester research company told the Economist magazine.

And some conservative, anti-tax groups plan to fight the marketplace fairness act in the House. A Tea Party-backed congressman, U.S. Rep. Thomas Massie, R-Ky, is urging his House colleagues to join him in opposing the bill, which he claims results from pressures from “big business” on “big government politicians.”

“Not only would this legislation boost the tax bill for America’s consumers, it would slow down an already stagnant economy,” Massie wrote. “Our job creators are already hampered by aggressive regulations – they simply can’t afford more bureaucratic red tape.”

Durbin rejects that argument, noting that the bill does not impose new taxes – a function of the states – but simply makes it possible for states to collect such revenues effectively.

“This bill will affect the big boys, retailers like Amazon and eBay ... it does not affect these small retailers,” Durbin said in a Senate speech.

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