Online sales tax bills gather major congressional support

More than 50 lawmakers sponsor legislation that would require online sellers to collect sales tax

A large group of U.S. lawmakers has reintroduced legislation that would require online retailers to collect sales tax for state and local governments, essentially raising the cost of many online purchases by 10 percent or more.

Fifty-three senators and representatives have signed onto the Marketplace Fairness Act, introduced in both chambers of Congress Thursday. The bill would allow states to collect sales tax from online retailers.

Supporters of an online sales tax have been trying for years to pass legislation that would allow states to collect online sales tax from online sellers, but supporters said they have momentum this year.

Currently, online retailers that have no physical presence in a state aren't required to collect sales tax from residents, although some do anyway. Online sales from stores that have retail locations or warehouses in the state of the buyer are now taxed.

Forty-six states charge sales tax for brick-and-mortar stores, and require residents to pay taxes for online purchases, but the vast majority of customers aren't aware of those requirements.

The current situation is unfair to brick-and-mortar businesses that have to collect sales tax, supporters of the bills said.

"For over a decade, congressional inaction has created one of the largest tax loopholes of our lifetime," Senator Mike Enzi, a Wyoming Republican and bill co-sponsor, said in a statement. "The federal government should not favor some businesses over other businesses and some taxpayers over other taxpayers."

Opponents of the legislation, including some tech trade groups, say it would hurt e-commerce. With nearly 10,000 taxing jurisdictions in the U.S., many with their own rates and rules on what is taxed, small online sellers will have a hard time determining what sales tax to charge customers, critics said.

After a decade of trying, states have failed to create a simplified tax system to help online sellers collect taxes, said Steve DelBianco, executive director of e-commerce trade group NetChoice. "Failing to require that states simplify their tax systems before enacting these new taxes is putting the cart before the horse," he said in an email.

Instead of leveling the playing field between online and other retailers, the bill "would create a new imbalance by requiring small online retailers to administer a tax collection regime for multiple jurisdictions, while brick-and-mortar stores need only collect for the jurisdiction of its physical location," the Computer and Communications Industry Association said in a statement.

A large coalition of business groups voiced support for the legislation. The current rules give online retailers "a perceived price advantage of up to 10 percent, a competitive edge that results in government policy picking winners and losers in the free market," the Retail Industry Leaders Association, representing 200 large retailers, said in a statement.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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