Gov. Walker would use online sales tax to lower income tax

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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, which the Senate approved earlier this month, would empower states to tax online purchases but would exempt small businesses that earn less than $1 million annually from out-of-state sales.

The bill now heads to the House Judiciary Committee for consideration. 

The proposal has the support of a host of GOP governors, including Chris Christie of New Jersey, Rick Snyder of Michigan and Bob McDonnell of Virginia.

Its supporters argue it would close an unfair loophole that benefits online retailers over brick-and-mortar stores, but opponents worry it would be complicated to implement and would stifle online commerce.