Online sales tax faces tougher opposition in House
May 14, 2013,
WASHINGTON — Whether online retailers will have to collect sales taxes is now up to the U.S. House of Representatives.
Although The Marketplace Fairness Act, or S. 743 - which would enable states to require most online sellers to collect such taxes - overwhelmingly passed the Senate on May 6 by a vote of 69 to 27, the bill faces a tougher road in the Republican-led House.
Consumers in states with sales taxes are supposed to remit those taxes if they buy goods online and aren't charged tax by the seller, but much of the time they don't.
The 1992 case came well before online sales began realizing their potential. The Census Bureau estimated U.S. e-commerce sales for 2012 at $225.5 billion, an increase of 15.8% from 2011. E-commerce sales accounted for 5.2% of total retail sales last year, up from 4.7% in 2011.
The channel shows little signs of slowing as more bricks-and-mortar stores adopt multichannel strategies.
Estimates of lost state and local tax revenue from remote sellers range from $11.4 billion in a 2009 University of Tennessee study to $24 billion by the National Retail Federation.
The Senate bill would allow states to collect sales tax from Internet retailers though the Streamlined Sales and Use Tax Agreement, which aims to simplify administration of states' sales taxes.
While some Senate objections came from states that don't collect sales taxes, objections in the House have ranged from concerns about taxing companies with little connection to a state, to suggestions the bill creates a new tax. House Speaker John Boehner, R-Ohio, told Bloomberg Television last week he likely would not support the bill, saying the multitude of sales tax codes would make it too cumbersome to implement.
The speaker may be out of touch with today's technology, said Wogie Badcock III, executive vice president of public affairs and board chairman for Badcock Home Furniture & More, who was in Washington last week rallying support for the House bill.
"With the computer software out today it is very easy to figure out the state and local tax codes," Badcock said.
He said Boehner has placed the bill before the House Judiciary Committee. Chairman Bob Goodlatte, R-Va., believes the committee already has a full docket with immigration reform and gun control measures, Badcock said.
"It's really too soon to tell when the full attention of the House will be on it," he said.
While the bill has the support of online behemoth Amazon - which has been cutting sales tax deals with some states in recent years - other ecommerce players like eBay are opposing it and are pushing for a collection exemption for small businesses with less than 50 employees or under $10 million in sales.
The Senate bill's small dealer exception applies to retailers with remote sales of less than $1 million annually.
Ron Cardi, an owner of Cardi's Furniture - whose problems with showrooming were cited by Rhode Island Democratic Sen. Jack Reed last month to rally support for the bill - said he doesn't have "a good feeling one way or the other which way these folks will vote."
"The key is to get it out of committee and get it on the floor for a vote," he said.
Reed told the Senate it's not uncommon for Cardi's to deliver furniture to customers wanting to see if it fits right in their home, then have it returned to store - with the consumer buying the same items later from a remote seller to avoid sales tax.
"We cannot have our retailers in states such as Rhode Island simply be showrooms for remote sellers. That is one of the consequences of this loophole we have to correct," Reed told the Senate.
Currently, Cardi's is registered to collect sales tax in Rhode Island, Connecticut and Massachusetts and also sells furnishings online.
"If product is delivered outside of that tri-state area we are not registered to collect - although we believe we should be. But we don't have any authority to collect it at this point outside of those jurisdictions," Cardi said.
The bill would level the retail playing field, he said, adding that small businesses won't be hurt by the bill as opponents are portraying. He said all retailers should give the same sales tax support to communities where they sell.
"They can sell a product for whatever they want. And if they can sell it for less than us, God bless ‘em. But we don't think they can; we can be as competitive as anybody," Cardi said.
"No one enjoys paying taxes. But the reality of it is, it's part of the society we live and we live in the United States of America and you pay taxes to be here. From that perspective, it's a tax that's in place right now. It's a sales/use tax and it's owed."