Democrats push for new Internet sales taxes

by
July 5, 2010

by Declan McCullagh, CNET News

The halcyon days of tax-free Internet shopping will, if Rep. Bill Delahunt gets his way, soon be coming to an abrupt end.

Delahunt, a Massachusetts Democrat, introduced a bill on Thursday that would rewrite the ground rules for Internet and mail order sales by eliminating the option for many Americans to shop over the Internet without paying state sales taxes.

At the moment, Americans who shop over the Internet from out-of-state vendors usually aren’t required to pay sales taxes. Californians buying books from Amazon.com or cameras from Manhattan’s B&H Photo, for example, won’t be required to cough up the sales taxes that they would if shopping at a local mall.

This is hardly a new debate: pro-tax officials and state governments have been pressing Congress to require taxes to be collected for a decade or so. They argue that reduced sales tax revenue threatens budgets for schools and police, and say that, as a matter of fairness, online retailers should be forced to collect the same taxes that brick-and-mortar retailers do.

But with states scrambling for new sources of revenue during what may be a double-dip recession, pro-tax lobbyists are hoping that they’ll have better luck this year. The National Conference of State Legislaturesapplauded Delahunt’s legislation, saying he should be commended for allowing states to collect as much as $23 billion in new taxes.

So did the Retail Industry Leaders Association, whose tax committee members include Wal-Mart, Home Depot, Costco, AutoZone, Target, and IKEA.

On the other side are groups that advocate for lower taxes and retailers including Amazon.com and eBay. In astatement on Friday, Tod Cohen, eBay’s vice president for government relations said: “At a time when unemployment rates are high and small businesses across the country are closing shop, we are confident that Congress will protect small Internet retailers and the consumers they serve from another Internet tax scheme.”

Co-sponsors of Delahunt’s bill, the “Main Street Fairness Act,” include Reps. Michael Capuano, John Conyers, Stephanie Herseth Sandlin, and Peter Welch, all Democrats. No Republican has signed on as a co-sponsor.

The final version of Delahunt’s legislation had not yet been made public on Friday, and his office did not immediately respond to queries from CNET. But it’s expected to be similar to other versions he’s introduced before.

Earlier versions were drafted in response to a U.S. Supreme Court decision saying that, in general, out-of-state retailers can’t be required to collect sales taxes unless Congress changes the law. The justices noted in a 1992 case called Quill v. North Dakota: “Congress is now free to decide whether, when, and to what extent the States may burden interstate mail order concerns with a duty to collect use taxes.”

To read more, visit: http://news.cnet.com/8301-13578_3-20009603-38.html?part=rss&subj=news&tag=2547-1_3-0-20

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