Online sales tax bill set for vote in the Senate

Senate Majority Leader Harry Reid (D-Nev.) has moved to bring online sales tax legislation to the Senate floor, likely setting up a vote for early next week.

On Thursday, he filed to end debate on the bill, which is known as the Marketplace Fairness Act.

The move skips over the Senate Finance Committee, which has jurisdiction over the issue but has not held any votes or hearings on the bill this session.

Finance Committee Chairman Max Baucus (D-Mont.) has insisted that the bill should go through his committee. He has expressed concern with the bill but said he would be willing to consider it as part of negotiations over broader tax reform.

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“Harry Reid is hell-bent on bringing it to the floor, bypassing the committee,” Sen. Orrin Hatch (R-Utah), the Finance Committee's ranking member, said on Thursday. “I don’t think it’s the right way to do things, especially on something that important. And we’ll just have to see what happens.”

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 purchases but would exempt small businesses that earn less than $1 million annually from out-of-state sales. 

The lead sponsors are Sens. Dick Durbin (D-Ill.), Mike Enzi (R-Wyo.) and Lamar Alexander (R-Tenn.).

They argue the bill would close an unfair loophole that benefits online retailers over local brick-and-mortar stores. Critics, including some online businesses and anti-tax groups, worry the legislation will be overly complicated to implement and will stifle online commerce.

Last month, 75 senators voted for a nonbinding budget resolution amendment expressing support for allowing states to tax online purchases. Although the vote had no legal impact, it was an important demonstration of support for the proposal.

Reps. Steve Womack (R-Ark.), Jackie Speier (D-Calif.), Peter Welch (D-Vt.) and John Conyers (D-Mich.) have introduced companion legislation in the House, but the chamber is likely to move more slowly than the Senate. The House bill will head to the Judiciary Committee, which has yet to schedule a hearing on the issue.