Wall Street groups on Monday urged Congress to slow down work on an online sales tax bill, warning the legislation might allow states to begin taxing stock trades.
The Securities and Financial Markets Association and the Financial Services Roundtable said the Senate is moving too quickly on the Marketplace Fairness Act, and might be failing to appreciate the impact it could have on the financial industry.
“We believe the impact of this legislation on trade in services has not been adequately explored by Congress," said Kenneth Bentsen, SIFMA's acting president and CEO. "The bill could lead to unexpected costs being passed on to consumers of financial services, including sales taxes on services or state-level stock transaction taxes."
The bill, set to receive a floor vote in the Senate this week, would allow states to begin taxing online purchases from companies located outside their borders.
"A transaction tax on financial services products will hurt retail investors, retired Americans, and small businesses, effectively making it more expensive for them to invest and plan for the long-term. Without hearings, these implications and others will not be properly addressed," he said.
Senate Majority Leader Harry Reid (D-Nev.) announced last week that he was bringing the sales tax bill directly to the Senate floor, bypassing the chamber's Finance Committee. The bill is set for a procedural vote late Monday. If the bill passes that test, it would set the stage for a final vote that could come as early as Wednesday.
The bill 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 legislation is backed by brick-and-mortar retailers, who argue it would close an unfair loophole that unfairy favors online merchants. The National Retail Federation announced Friday it was scoring the vote, calling it a "commonsense piece of legislation necessary to modernize our … understanding of sales tax laws."
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 bill is strongly opposed by other online retailers. EBay, for example, is enlisting its users in pushing for changes to the bill. EBay Chief Executive John Donahoe has signed off on tens of millions of emails to eBay users calling for Congress to adopt minimum thresholds for business activity that could be subject to the tax.
"The legislation treats you and big multi-billion dollar online retailers — such as Amazon — exactly the same," he said in one of the messages, according to The Wall Street Journal.
The bill also faces opposition from conservative groups. The Heritage Foundation, Americans for Tax Reform and Americans for Prosperity have all urged lawmakers to oppose the bill on the grounds that it would be burdensom for retailers to be tax collectors for other states.
This post was last updated at 12:43 p.m.