April 22, 2013, 6:23 PM — The U.S. Senate has voted 74-20 to close debate and move to a final vote on a bill allowing states to collect sales tax from out-of-state Internet and catalog retailers.
The Senate's Monday vote sets up an expedited vote on the Marketplace Fairness Act in the coming days. The bill would allow states to collect sales tax on Internet sellers that have no presence within their borders, creating a formal process for collecting taxes that many U.S. residents now owe but don't pay.
The legislation, with more than 80 lawmakers signed on as sponsors in the Senate and House of Representatives, would end an unfair situation in which brick-and-mortar retailers must charge their customers 5 percent to 10 percent more than their Internet counterparts, said Senator Mike Enzi, a Wyoming Republican and lead sponsor of the Internet sales tax bill.
"We should not be subsidizing some taxpayers at the expense of others," Enzi said on the Senate floor. "All businesses and their retail sales should be treated equally."
While supporters argued the bill would only allow states to collect taxes that are already owed, Senator Ron Wyden said U.S. buyers won't see it that way. "This is money that's going to come out of the pockets of American families that has not come out of their pockets before," said Wyden, an Oregon Democrat.
The bill takes the Internet "down a dangerous path" by allowing the government of one state to require businesses in another state to collect its taxes, Wyden said. "The proposal, in effect, unleashes all the nation's tax collectors on small Internet businesses," he said. "There's no difference in New York telling Oregon Internet firms to enforce New York laws than China telling American firms to enforce China's censorship practices."
Momentum in Congress for passing an Internet sales tax bill is growing. Earlier Monday, President Barack Obama's administration signaled that it supports the Internet sales tax bill. If the legislation passes through the Senate, it would still have to pass through the House before going to Obama's desk for his signature.
The bill would "level the playing field for local small business retailers that are in competition every day with large out-of-state online companies," the White House said in a statement.
Forty-six states have sales taxes, and all require residents to report purchases they make from websites and catalogs and pay sales tax. But a 1992 Supreme Court ruling prohibits states from collecting sales tax from sellers that have no physical presence within their borders.
Many U.S. residents don't know of the requirements to pay tax sales taxes on Internet purchases, and the state requirements are largely ignored.