The Internet has the potential to bring in sales tax for broke states. It’s a new law that would allow 45 states and the District of Columbia to demand that online retailers collect tax on purchases.
Estimates are that consumers would be spending between $12 billion to $23 billion more a year due to the increased tax collection.
The National Retail Federation is one of the most active voices in support of the proposal, as it is concerned its brick-and-mortar members are losing sales to online competitors. Amazon.com, the largest online retailer, is also backing the bill. It is expanding the number of warehouses nationwide, so most Americans already pay sales tax on their Amazon purchases.
So Amazon doesn’t want a competitive disadvantage with other online retailers that have a smaller geographic footprint.
However, many online retailers are opposed, saying it would create an administrative nightmare to comply with the law, and that higher taxes would hurt their sales.
On Sunday, eBay CEO John Donahoe sent an e-mail message to millions of users asking them to contact members of Congress. The e-mails went to eBay members who simply buy online in addition to its millions of sellers. Donahoe advocates a threshold of $10 million in annual sales or 50 employees before an online retailer would have to start collecting sales taxes.
While Republican advocates of the bill insist that the bill imposes no new taxes and only allows collection of existing ones, anti-tax activist Grover Norquist of Americans for Tax Reform wrote to senators Monday urging them to vote against the bill.
The legislation has strong bipartisan support, with the lead sponsors in both houses being Republicans. But it has never been able to get out of committee for a vote on the floor of either chamber before now. Democrat Max Baucus, the chairman of the Senate Finance Committee, has kept the legislation from advancing.
Baucus is from Montana, one of the five states without a sales tax.