Senators stall vote on Internet sales tax for now

Supporters of the legislation still hope to vote in the Senate Friday or Saturday

By , IDG News Service |  IT Management

A handful of lawmakers have stalled the U.S. Senate from voting on legislation that would require large Internet and catalog sellers to collect state sales taxes from their customers.

Supporters of the Marketplace Fairness Act still hope to vote on the bill on Friday or Saturday. The bill would allow states to collect sales tax on large Internet sellers that have no presence within their borders, curtailing the ability of Internet shoppers to avoid sales tax. Businesses with less than US$1 million in annual Internet sales would be exempt from collecting the sales taxes.

A small group of senators, including Democrats Ron Wyden of Oregon and Max Baucus of Montana, have held up the legislation this week by objecting to any amendments offered on the Senate floor. The objections have brought the Senate to a standstill, with supporters of the bill unwilling to move on to other legislation, and opponents unwilling to allow amendments.

Congress shouldn't force Internet sellers to collect sales tax for states where they have no voice or operations, Wyden argued.

The bill requires that the states provide free tax collection software to Internet sellers, but implementation would still be costly to many small sellers, Wyden said. The bill would also expose Internet sellers to tax audits from more than 40 states, opponents said.

"This debate is about the little guy," Wyden said.

Supporters of the Marketplace Fairness Act say the current situation is unfair to bricks-and-mortar retailers, who have to charge a 5 to 10 percent sales tax on their products, while many Internet sellers do not. States with sales taxes are missing out on an estimated $23 billion in tax revenue because a 1992 Supreme Court ruling prohibits states from collecting sales tax from sellers that have no physical presence within their borders.

The current situation hurts small businesses in Massachusetts, said Senator William "Mo" Cowan, a Massachusetts Democrat. "Billions in sales are sent elsewhere," he said. The Senate should pass the bill because "a sale is a sale is a sale," he added. "Outsiders should not be treated better than insiders."

Lawmakers have been fighting for more than a decade to pass Internet sales tax legislation, and some businesses have called on Congress to fix the problem since the 1992 Supreme Court case, supporters said. "These Main Street business have been waiting for over 20 years for equality, for fairness," said Senator Heidi Heitkamp, a North Dakota Democrat involved in the court case while serving as the state's tax commissioner.

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