A bipartisan group of senators reintroduced legislation Tuesday to apply sales taxes to all Internet purchases, long a goal of state and local governments as well as traditional “bricks and mortar” retailers. The legislation would require online merchants to collect and remit sales taxes to the local authorities where the purchaser lives.
Similar legislation easily passed the Senate, 69-27, last Congress, but stalled in House due to opposition from the Republican leadership. Passage in the Senate is less likely this time since Sen. Mitch McConnell, R-Ky., an opponent of the legislation, is now majority leader.
Proponents nevertheless believe they can still get in through the Senate. “Businesses in Illinois are looking for a level playing field. We came close in the last Congress, but the bill was never acted on in the House of Representatives. I hope that in the 114th Congress we can do what’s right for businesses in Illinois and around the country,” said Sen. Dick Durbin, D-Ill., a co-sponsor.
Co-sponsors of the legislation include Sens. Mike Enzi, R-Wy., Lamar Alexander, R-Tenn., and Heidi Heitkamp, D-N.D.
Ever since Internet commerce took off in the late 1990s, traditional retailers have argued that online retailers have an unfair advantage because sales taxes are rarely applied to those purchases. They have allies among state and local government officials who rely on sales taxes for revenue. The National Retail Federation says that lost tax revenue now totals $25 billion annually.
Their efforts to collect those taxes have been stymied by a 1992 Supreme Court decision that said only Congress could require online levies because the sales were interstate commerce.
Critics charge that the coalition’s “level the playing field” rhetoric is less about fairness and more about raising taxes and stifling competition and that requiring online merchants to navigate the multiple tax rates in every locality would be an unfair burden. The critics note that while taxes are rarely applied to remote online sales, customers often pay shipping and handling costs, which usually erase any tax advantage.
