Online sales tax bill likely dead for 2012

Supporters of an online sales tax are unlikely to get a vote on their bill during this session of Congress.

Christina Mulka, a spokeswoman for Sen. Dick Durbin (D-Ill.), said the bill is unlikely to come up this year. Durbin plans to re-introduce the measure during the next session of Congress, she said.

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"It's no secret that time is running out," said David French, the top lobbyist for the National Retail Federation, which supports the legislation.

The supporters of the bill had tried unsuccessfully to add it as an amendment to various other pieces of legislation, including the defense authorization bill and a cybersecurity bill.

An aide to Sen. Max Baucus (D-Mont.), the chairman of the Finance Committee, said the senator believes Congress should deal with the issue as part of comprehensive tax reform legislation next year.

French agreed that including the bill in negotiations over tax reform is a possible path for getting it into law next year.

But because Montana has no statewide sales tax, Baucus may be reluctant to push the legislation unless he gets some other tax provisions in exchange.

Under current law, states can only collect sales taxes from retailers that have a physical presence in their state. People who order items online from  another state are supposed to declare the purchases on their tax forms, but few do.

The Marketplace Fairness Act, authored by Sens. Durbin, Mike Enzi (R-Wyo.) and Lamar Alexander (R-Tenn.), would empower states to tax their residents' online purchases. The bill exempts small businesses that earn less than $500,000 annually from out-of-state sales.

In a hearing on the legislation in August, Durbin argued that the bill is not a new tax and would help traditional brick-and-mortar stores compete with online giants.

"Small businesses in my home state of Illinois don’t want a handout from Washington," he said. "They don’t want special treatment. All they want is a level playing field."

Supporters of the legislation say the additional revenue could help states pay for vital services or cut other taxes.

But critics of the bill say it would be complicated to implement and would stifle online commerce.