Senate takes major step toward Internet sales tax

Senators vote to cut off debate on the Marketplace Fairness Act and move toward a final vote

By , IDG News Service |  IT Management

Monday's vote expedites Senate action on the Marketplace Fairness Act, with a final Senate vote on the bill without hearings during this session of Congress. Supporters of the bill have been trying to get a version of an Internet sales tax passed for years, and there have been hearings in the past.

The bill exempts small businesses with less than US $1 million in remote sales a year from collecting the sales taxes. It also requires states that decide to collect remote taxes to provide free tax calculation software to Internet retailers.

But the bill would expose Internet and catalog sellers to tax audits from all states collecting sales taxes, said representatives of four trade groups making up the True Simplification of Taxation (TruST) Coalition. States have not simplified their sales taxes enough to meet the standard set up in the Supreme Court cases, members have argued.

The bill would create a "bureaucratic nightmare" for remote sellers, said Steve DelBianco, executive director of NetChoice, an e-commerce trade group. "It would force businesses to pay more programmers, accountants and lawyers, instead of hiring more manufacturing and sales people," he said during a press conference.

There's no reason for the Senate to push the bill through without a hearing and time for debate, said Ron Barnes, vice president of state affairs for the Direct Marketing Association. The bill "has major flaws and would be a tremendous burden on the backs of remote sellers," he said.

TruST called on sponsors of the bill to build in several additional protections for remote sellers. Lawmakers should require each state to have a single sales tax for remote sales, not separate taxes for cities and other taxing jurisdictions, the group said. States should also have a common definition for what products are taxed and what products are exempt from tax, the group said.

Supporters of the bill argued states are losing out on billions of dollars in tax revenue because they can't now require Internet sellers to collect sales taxes. Many brick-and-mortar stores are serving as "display cases," where potential customers try out products before buying them cheaper online, said Senator John "Jay" Rockefeller, a West Virginia Democrat.

"This strikes me as profoundly unfair," he said.

Rockefeller, a co-sponsor of the Marketplace Fairness Act, downplayed concerns that sales tax collections would be difficult for Internet sellers. "The Internet is the perfect environment to collect sales taxes, because it can be automated," he said.

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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