Online sales tax receives lobbying push from states

Retailers are waging a state-by-state campaign to pressure Washington to approve legislation authorizing an online sales tax — a tough election-year sell to a Congress not inclined to support anything that appears to be a tax increase.

The effort includes fly-in visits by local business groups, meetings in lawmakers’ district offices and coordinated letters and op-eds meant to highlight the disadvantage brick-and-mortar retailers are feeling with their online brethren.

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Retailers argue their disadvantage is growing as online companies like Amazon gobble up larger and larger sales. Due to a 1992 Supreme Court decision, state governments can only force companies that are physically located in the state to collect sales tax revenue.

The groups argue allowing a sales tax on online retailers isn’t really a tax increase, but a matter of collecting a tax that is already owed.

Yet consumers would certainly feel the pinch, which raises the odds against the legislation in an election year. Still, supporters think they’re making clear gains in their effort, and believe a law is within view.

They note that Republican governors such as Robert Bentley (Ala.) and Rick Snyder (Mich.) have backed an online sales tax, which could give cover to Republicans in Congress to approve legislation.

“It seems all the key players are coming together and trying to find a compromise,” said Blake Wilson, president of the Mississippi Economic Council.

Two bipartisan bills in the House and Senate — called the Marketplace Equity Act and the Marketplace Fairness Act, respectively — would allow states to gather sales taxes from certain out-of-state sellers.

In a letter last month sent to every member of Mississippi’s congressional delegation, Wilson’s group highlighted an estimate from the National Conference of State Legislatures that the state will lose $300 million in local and state revenue for 2012 by not taxing online sales.

“Here in Mississippi, $300 million would mean fully funding state education efforts. This would be huge,” Wilson said.

One argument supporters have made is that if the online sales tax isn’t added, states will be under pressure to raise other taxes on local businesses.

Rep. Steve Womack (R-Ark.), the House bill sponsor, said he has warned his fellow Republicans that states facing budget difficulties might have to turn to tax increases if Congress doesn’t act on an online sales tax.

“At some point in time, the impact of this imbalance is going to be so egregious to city, county and state governments that they’re going to have to find ways to make up for lost revenue,” Womack said.

Womack acknowledged that some GOP lawmakers are concerned about getting behind anything that could be dubbed a tax increase. But he said it’s not fair that states can make some retailers collect sales tax, but not others.

“I certainly believe that taxpayers ought to be able to keep as much of their money as they possibly can,” Womack said. “I’m not for the government deciding which model of retail sales is preferred.”

Amazon has agreed to collect sales tax in several states as it has faced pressure from local governments and states have passed their own laws, risking a patchwork of different regulations across the country.

Some courts have struck down those laws — like in Colorado and Illinois — saying they violate the Constitution’s Commerce Clause.

As a result, retailers say, a federal law is needed.

“You have got states running off and doing their own thing,” said Dave Davis, president of the Utah Retail Merchants Association. “It’s really creating an unworkable situation for a lot of folks, including online retailers.”

Rep. Lamar Smith (R-Texas), the chairman of the House Judiciary Committee, said that his panel would be holding a hearing on the issue in July.

Smith was among more than a half-dozen GOP lawmakers — from states whose governors have mostly endorsed online sales legislation — who declined to speak in detail about the bills’ merits, with several saying they were still studying the issue.

Republicans who did offer opinions on the proposals suggested they were caught between limiting constituents’ tax bills and ensuring fairness for hometown retailers.

Sen. Jeff Sessions (R-Ala.) and Rep. Diane Black (R-Tenn.) both said that they understood Main Street businesses’ argument that they were being disadvantaged.

Black said she wants there to be “a level playing ground” but that she wasn’t sure she wanted to force Americans to foot a higher bill — similar to what Sen. Jim DeMint (R-S.C.) and conservative opponents of the bill have said.

“Because I want the people to have their money in their pocket, so that they can make the best decision about where to spend it — not government,” Black said.

Sessions said that the two  key GOP sponsors of the Senate bill, Sens. Lamar Alexander (Tenn.) and Mike Enzi (Wyo.), had made a good case for their proposal.

“Every time I think I’ve got it in my head over the years — this has been going on virtually since I came to the Senate 15 years ago — you realize it’s a lot of complexities to it. You hear arguments on both sides that tend to oversimplify it,” Sessions said.

Others, like Rep. Mike Simpson (R-Idaho), were more sympathetic.

“Unfortunately, the general public, when you say taxing Internet sales, they think you’re talking about taxing the use of the Internet,” Simpson said. “Which is different than taxing the sales on online goods.”

State retail groups point to new supporters joining their bill as a reason for optimism.

Gordon Gough, executive vice president of the Ohio Council of Retail Merchants, noted that Rep. Steve Stivers (R-Ohio) had signed onto the House bill.

“A big part of it is education,” Gough said. “Once we get through the education phase, I think you will see legislation pass the Congress.”