House Online Sales-Tax Bill Draws Bipartisan Support

Two House lawmakers introduced bipartisan legislation on Wednesday to close a loophole that allows some online retailers to avoid collecting sales taxes on some transactions.

The bill, offered by Reps. Steve Womack, R-Ark., and Jackie Speier, D-Calif., would authorize states to force retailers to collect sales taxes, even online firms, and even when their customers reside in states where the companies have no physical presence.

The bill would require states to simplify the process for out-of-state retailers, including providing a single sales tax rate, designating a single source for remitting sales taxes from out-of-state sales, and establishing uniform rules for what sales are taxable. Small retailers with annual in-state sales of less than $100,000 and national sales of less $1 million would be exempt from having to collect taxes on out-of-state sales.

Many states have been pushing lawmakers to close the loophole created by the Supreme Court's 1992 Quill decision that found retailers don't have to collect sales taxes from customers in states where those companies do not have a physical presence.

The ruling related to catalog sales but has since been extended to include online retailers. States say they have been losing billions in sales taxes with the growth of e-commerce. Major online retailers such as Amazon.com have been particularly aggressive in opposing such legislation.

While aimed at achieving the same goal, the House measure differs from legislation introduced this summer by Senate Majority Whip Dick Durbin, D-Ill. His measure would authorize states that have signed on to the Streamlined Sales Tax project, created by states to align their sales tax regimes, to require retailers to collect taxes on out-of-state sales.

Similar legislation has been introduced in past years with bipartisan support, but Durbin was unable to attract GOP support for his measure.

Jason Brewer, a spokesman for the Retail Industry Leaders Association, said while his group supports both the Durbin bill and the Womack-Speier measure, the House bill could appeal to a wider group of states. Only 24 states have passed conforming legislation required by the Streamlined Sales Tax project and would be eligible under Durbin's bill to require retailers to collect taxes from out-of-state sales.

"Government shouldn't be picking winners and losers by giving a handful of online retailers special treatment. Whether a sale happens in a store or online, the state sales tax collected should be the same," Retail Industry Leaders Association executive vice president Katherine Lugar said in a statement. The group represents big box retailers like Target and Walmart.

But online retailers such as eBay, the Electronic Retailers Association, Overstock.com, Yahoo, and others say the small-business exception sets too low a threshold for when smaller firms have to start collecting sales taxes from out-of-state customers.

"The anemic small business exception in this bill is no help to thousands of small and mid-sized employers who depend on Internet sales to compete," said Steve DelBianco, executive director of the lobbying group NetChoice.

Tod Cohen, eBay's vice president for government relations, also cited concerns about the bill's impact on small business. "At a time when our economy faces continued challenges with economic growth and jobs, Congress should reject this proposal to expand Internet sales taxes because it will hurt entrepreneurial small business retailers and kill jobs," he said in a statement.

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Juliana Gruenwald is a special correspondent for National Journal Daily and a technology writer for National Journal's Tech Daily Dose

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