Durbin, Schock criticize online sales tax 'loophole'

A bipartisan pair of lawmakers is putting the pressure on Congress to pass an online sales tax bill.

Sen. Dick DurbinRichard (Dick) Joseph DurbinGun proposal picks up GOP support Durbin: I had 'nothing to do' with Curbelo snub Republicans jockey for position on immigration MORE (D-Ill.) and Rep. Aaron Schok (R-Ill.) wrote an op-ed in the Spring, Ill., State Journal-Register on Monday deriding a “loophole” that prevents people from paying sales tax at many online stores, which they say gives them a price advantage over brick-and-mortar shops.

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“[I]t needlessly is putting people out of business in Illinois and across the country,” they wrote.

“Main Street businesses have a hard time surviving when their stores become showrooms, where people come in, look around, even try out merchandise, and then leave to buy the product online to avoid paying state taxes.”

Currently, people shopping at online stores do not have to pay sales tax on purchases made from stores located in other states.

While Illinois’s income tax returns include a line for residents to declare those out-of-state purchases, just about 5 percent of people pay it, the lawmakers claimed. They said that that adds up to more than $185 million in state and local taxes that are owed by not collected.

Lawmakers have tried to change the federal law to allow states to collect more taxes, but so far have not been effective.

"Congress needs a bill that will close the online tax loophole and allow states to make sure both Main Street businesses and online retailers play by the same set of rules," Durbin and Schock wrote on Monday. 

During the last session of Congress, the Senate passed the Marketplace Fairness Act to allow states to collect sales taxes on purchases residents made from out-of-state retailers, but the legislation hit a wall in the House.

The issue is sure to return to Capitol Hill in coming months.