WASHINGTON (AP) — More than 21 states have simplified how they collect taxes
in hopes of recovering an estimated $20 billion in sales taxes that go
uncollected by out-of-state online merchants every year. But the nation’s
governors say they still need help from Congress.
Speaking on behalf of the National Governors Association, Tennessee Gov.
Bill Haslam told the House Judiciary Committee on Tuesday it isn’t fair to
local businesses that online sellers are not required to collect and
distribute state sales taxes for purchases made where they don’t have a
In states with sales tax, online buyers are required to pay a “use tax” for
items upon which no sales tax has been paid, but often sellers don’t enforce
it or buyers are not aware of the requirement.
“This discussion isn’t about raising taxes or adding new taxes,” Haslam
said. “This is about states having the flexibility and authority to collect
taxes that are already owed by their own in-state residents.”
Through the Streamlined Sales and Use Tax coalition, around 21 states are in
full compliance with the laws and regulations set forth by the cooperative
and have agreed to implement the policies and software technology that would
make it easy for even the smallest businesses to collect and forward sales
taxes across state lines.
Reps. Steve Womack, R-Ark., and Jackie Speier, D-Calif., urged the House to
pass the Marketplace Equity Act of 2011, which is co-sponsored by 48 House
lawmakers from both parties.
The act was in response to a 1992 Supreme Court decision that restricted
states from collecting sales taxes on Internet transactions with online
retailers that are not physically connected with the state.
Similar online sales tax legislation discussed in Congress during at least
the past decade all have lacked enough support to become law. As both
parties remain unwilling to let the other claim legislative victory, the
bill’s fate is dubious.
Some Republican governors such as Chris Christie of New Jersey and Terry
Branstad of Iowa have endorsed legislative action to make out-of-state
Internet merchants charge and collect state taxes.
Yet, ideological disagreements between conservatives have become more
evident in the bill’s two sister Senate measures: the Main Street Fairness
Act and the Marketplace Fairness Act.
Republican Sens. Kelly Ayotte of New Hampshire and Jim DeMint of South
Carolina have argued that any federal law that allows states to require the
collection of online sales tax would impose an unwarranted burden on
struggling families and recovering businesses.
Steve DelBianco, executive director of NetChoice, a coalition of e-commerce
companies, said the Marketplace Equity Act of 2011 does not provide enough
guidelines to simplify the process of collecting and distributing taxes.
The bill “does not adequately protect America’s small businesses, for whom
new collection burdens would be disproportionately complex and expensive,”
DelBianco told the committee.
States that have no income taxes and those that rely on sales taxes for
their revenue have a strong interest in the bill due to the additional
income that could be generated if states start collecting online sales
Retailers’ e-commerce sales increased by 16.3 percent between 2009 and 2010
to $169 billion, according to the Census Bureau. The Forrester Research
company estimated that around 25 million more Americans are expected to shop
online in the next four years.