Senators push bipartisan bill to collect Internet sales taxes

“If they choose to collect already existing sales taxes on all purchases, regardless of whether the sale was online or in store, they can. If they want to keep things the way they are, it’s a state’s choice.”

The bill would close a loophole left by a 1992 Supreme Court decision that exempted retailers from collecting sales taxes from customers in states where stores have no physical presence. At the time, the ruling was aimed at catalog purchases, but the proliferation of the Internet has changed the retail landscape.

The legislation would streamline about 7,600 local sales tax systems, which at the time the court said were too complicated for a retailer to know how much tax to collect.

The National Retail Federation, a longtime proponent of the bill, called this latest effort the best option for a measure that could get through Congress.  

“Over the last 20 years the retail industry has changed dramatically, but unfortunately our antiquated regime for sales tax collection has not kept up,” NRF President and CEO Matthew Shay said Wednesday during a conference call with reporters. 

The NRF said it is launching an aggressive lobbying campaign on Capitol Hill to find a way forward on the measure, although it isn’t sure if it will go through committee or be tacked onto another bill that could pass by year’s end. 

Although the bill has bipartisan support, not everyone is on board. 

“This is another Internet sales tax bill that fails to protect small business retailers using the Internet and will unbalance the playing field between giant retailers and small business competitors,” said Tod Cohen, vice president for government relations and deputy general counsel at eBay, in a statement emailed to The Hill. 

“It does not make sense to expand Internet sales tax burdens on small businesses at a time when we want entrepreneurs to create jobs and economic activity.”

The Senate bill provides states with two options to meet certain requirements, including agreeing to voluntarily participate in the Streamlined Sales and Use Tax Agreement. 

A total of 24 states have permanently changed their tax laws and implemented the requirements of the agreement, which would help harmonize states’ sales and use tax rules.

Alternatively, states that do not wish to join the group with the other states would be allowed to collect the taxes only if they adopt certain minimum simplification requirements — setting up a single state agency through which retailers can send the taxes, providing a uniform sales and use tax base, providing software to help collect taxes and protecting remote sellers from liability for mistakes made in collections if the information was provided by the state.

The legislation allows sellers that make less than $500,000 in total remote sales in the year preceding the sale to qualify for an exemption and not be required to collect the tax.  

Shay said his group is willing to negotiate on that level and any other part of the bill to gain its passage. But as the limits are raised there is a loss of a “significant portion” of the sales tax that can be collected. The NRF estimated that more than $25 billion in sales taxes goes uncollected annually. 

The senators said Wednesday they would like to see a hearing on the bill, although one has yet to be scheduled. 

The NRF said the House Judiciary Committee might hold a hearing on the issue. 

Sens. Tim Johnson (D-S.D.), John Boozman (R-Ark.), Jack Reed (D-R.I.), Roy Blunt (R-Mo.) Sheldon Whitehouse (D-R.I.), Bob Corker (R-Tenn.) and Mark Pryor (D-Ark.) are also co-sponsors of the legislation.                                   

A similar bipartisan bill was introduced in October in the House by Reps. Steve Womack (R-Ark.) and Jackie Speier (D-Calif.).

This story was updated at 3:50 p.m.