Internet tax supporters promise to allow amendments

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The Senate voted 70 to 24 on Monday evening to move forward with the legislation, the Marketplace Fairness Act. Votes on amendments and final passage of the bill are expected later this week.

At Tuesday's press conference, Durbin, along with co-sponsors Sens. Mike Enzi (R-Wyo.), Lamar Alexander (R-Tenn.) and Heidi Heitkamp (D-N.D.), argued that the bill would close an unfair loophole that benefits online retailers over brick-and-mortar stores.

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 would empower states to tax online retailers, but would exempt small businesses that earn less than $1 million annually in online sales.

Auction site eBay is lobbying to expand the small business exemption to $10 million.

But the sponsors argued that raising the small business exemption would only benefit big online businesses.

"As far as looking at higher amounts, what we're talking about is bigger and bigger retailers, not the small businesses," Enzi said. 

Durbin said the sponsors "bent over backwards" to address concerns about small online businesses and said that fewer than 1,000 online retailers would likely be covered by the bill because of the current exemption.

The sponsors also rejected the suggestion that states should be able to opt-out of having their retailers collect online sales taxes.

Enzi warned that such an amendment would encourage all online retailers to re-locate, at least legally, to states without sales taxes.

"It's not a compromise," Enzi said. 

Bringing the bill directly to the Senate floor skipped over Finance Committee Chairman Max Baucus (D-Mont.), whose panel has jurisdiction over tax issues.

On Monday, Baucus offered to hold a hearing and committee vote on the bill in the next Senate work period. But the sponsors said they have no plans to pull their bill now.

"Had a firm offer like that been made when we had a vote on the budget, that's probably the route we would have gone," Enzi said, referring to a vote the Senate held last month on the online tax proposal as a non-binding budget resolution amendment. "We're beyond that point now."

He said the vote this week will be their only chance to pass the legislation this year.

"This is our one chance to make it fair for all the retailers," Enzi said.