Tech Groups Oppose Internet Sales Tax Bill

Several tech trade groups oppose a bill that would require Internet retailers to collect sales tax.

By Grant Gross
Mon, August 01, 2011

IDG News Service — Several tech trade groups have voiced opposition to new legislation in the U.S. Congress that would require Web-based retailers to collect sales tax from customers.

The Main Street Fairness Act would allow states that have signed on to a multistate tax agreement to collect sales tax from Internet and catalog retailers. The bill was introduced Friday by six Democrats, including Senator Dick Durbin of Illinois and Representative John Conyers Jr. of Michigan.

Bill sponsors argued that the current sales tax system is unfair because bricks-and-mortar businesses have to collect sales taxes and most Internet retailers do not. "Main Street retailers collect sales taxes on behalf of consumers, why shouldn't online retailers do the same?" Durbin said in a statement.

Several similar bills in recent sessions of Congress have failed to pass.

Currently, because of a 1992 U.S. Supreme Court ruling, states aren't allowed to collect sales tax on retailers that don't have a physical presence within their borders. All states with a sales tax require individual consumers to keep track of their online purchases and pay sales tax on them, although few people do.

"Citizens will feel as if they're paying more than before," said Steve DelBianco, executive director of NetChoice, an e-commerce trade group. "Therefore, Congress is going to take the blame for a perceived tax increase, and businesses will blame Congress for new collection burdens for a system that's not simple at all."

Since 1999, a group of state officials has been pushing states to sign the Streamlined Sales and Use Tax Agreement, an effort to simplify sales tax collection across the U.S. The Supreme Court, in its 1992 decision, gave Congress the authority to collect sales taxes on out-of-state retailers if states agree to a simplified sales tax plan.

Twenty-four states have signed on to the streamlined sales tax agreement.

States will lose an estimated US$24 billion in 2012 because of uncollected sales taxes from Internet and catalog sales, Durbin said in a press release. "The Main Street Fairness Act doesn't ask anyone to pay a single penny more in taxes," he said. "Instead, it would help governors and mayors collect taxes that are already owed."

The bill would help state and local governments struggling with budget problems, sponsors said. "This will help our state and local governments avoid devastating layoffs and cuts to essential services vital to the well-being of our local communities," Conyers said in a statement.

The sales tax bill received support from Retail Industry Leaders Association, a trade group representing large retailers, including Best Buy (BBY), Apple (AAPL), Old Navy and Wal-Mart (WMT). Also supporting the legislation is Amazon.com, which has opposed efforts by individual states to collect online sales taxes.

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