Senate Wants to Force E-Tailers to Collect Sales Tax

by Christopher Freeburn | April 22, 2013 10:17 am

uncle sam taxes[1]Internet sales might not be tax-free much longer[2].

U.S. Senate Majority Leader Harry Reid (D-Nev.) is pushing a vote on a bill that would allow states to mandate the collection of sales taxes on online transactions. The bill could reach the Senate floor as early as this week. Conservatives oppose the measure, but a resolution in favor of the measure passed overwhelmingly in a non-binding vote last month, the Wall Street Journal notes.

In 2010, online sales accounted for about 4.4% of all retail sales, generating $169 billion. Over the prior decade online sales grew at an average yearly rate of 18%. By contrast, overall retail sales rose at an annual average rate of just 2.6% during that period.

State and local governments complain that failing to tax online sales costs them $20 billion in revenue each year. Under a 1992 Supreme Court ruling, states are not permitted to force Internet retailers who do not have physical operations within their borders to collect sales taxes from consumers.

Some large online retailers like Amazon (NASDAQ:AMZN[3]), which already collect sales taxes, have signaled support for the bill. But others, including eBay (NASDAQ:EBAY[4]), are mounting email campaigns to oppose it, arguing that it would impose a massive burden on small businesses that use the net to generate sales.

Senators from a number of states, like Montana, that do not have sales taxes have also opposed the bill, saying that it could harm business in their states.

While the bill could pass on a simple majority vote, it might have a harder time overcoming a possible filibuster. That would require at least 60 votes.

The opinions contained in this column are solely those of the writer.

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