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Tax-free Internet shopping jeopardized by bill

By Stephen Ohlemacher

Associated Press

LAST UPDATED: 05:05 a.m. HST, Apr 23, 2013

WASHINGTON » Tax-free shopping on the Internet could be in jeopardy under a bill making its way through the Senate.

The bill would empower states to require online retailers to collect state and local sales taxes for purchases made over the Internet. The sales taxes would be sent to the states where a shopper lives.

Under current law, states can only require stores to collect sales taxes if the store has a physical presence in the state. As a result, many online sales are essentially tax-free, giving Internet retailers a big advantage over brick-and-mortar stores.

The Senate voted 74 to 20 Monday to take up the bill. If that level of support continues, the Senate could pass the bill as early as this week.

Supporters say the bill is about fairness for businesses and lost revenue for states. Opponents say it would impose complicated regulations on retailers and doesn't have enough protections for small businesses. Businesses with less than $1 million a year in online sales would be exempt.

"While local, community-based stores and shops compete for customers on many levels, including service and selection, they cannot compete on sales tax," said Matthew Shay, president and CEO of the National Retail Federation. "Congress needs to address this disparity."

And, he added, "Despite what the opponents say this is not a new tax."

In many states, shoppers are required to pay unpaid sales tax when they file their state income tax returns. However, states complain that few people comply.

"I do know about three people that comply with that," said Sen. Mike Enzi, R-Wyo., the bill's main sponsor.

President Barack Obama supports the bill. His administration says it would help restore needed funding for education, police and firefighters, roads and bridges and health care.

But the bill's fate is uncertain in the House, where some Republicans regard it as a tax increase. Heritage Action for America, the activist arm of the conservative Heritage Foundation, opposes the bill and will count the vote in its legislative scorecard.

"It is going to make online businesses the tax collectors for the nation," said Sen. Kelly Ayotte, R-N.H. "It really tramples on the decision New Hampshire has made not to have a sales tax."

Many of the nation's governors — Republicans and Democrats — have been lobbying the federal government for years for the authority to collect sales taxes from online sales, said Dan Crippen, executive director of the National Governors Association. Those efforts intensified when state tax revenues took a hit from the recession and the slow economic recovery.

"It's a matter of equity for businesses," Crippen said. "It's a matter of revenue for states."

The issue is getting bigger for states as more people make purchases online. Last year, Internet sales in the U.S. totaled $226 billion, up nearly 16 percent from the previous year, according to Commerce Department estimates.

The bill pits brick-and-mortar stores like Wal-Mart against online services such as eBay. Amazon.com, which initially fought efforts in some states to make it collect sales taxes, supports it too. Amazon and Best Buy have joined a group of retailers called the Marketplace Fairness Coalition to lobby on behalf of the bill.

"Amazon.com has long supported a simplified nationwide approach that is evenhandedly applied and applicable to all but the smallest-volume sellers," Paul Misener, Amazon's vice president of global public policy, said in a recent letter to senators.

On the other side, eBay has been rallying customers to oppose the bill.

"I hope you agree that imposing unnecessary tax burdens on small online businesses is a bad idea," eBay President and CEO John Donahoe said in a letter to customers. "Join us in letting your members of Congress know they should protect small online businesses, not potentially put them out of business."

The bill is also opposed by senators from states that have no sales tax, including Sens. Max Baucus, D-Mont., and Ron Wyden, D-Ore.

Baucus said the bill would require relatively small Internet retailers to comply with sales tax laws in thousands of jurisdictions.

"This legislation doesn't help businesses expand and grow and hire more employees," Baucus said. "Instead, it forces small businesses to hire expensive lawyers and accountants to deal with the burdensome paperwork and added complexity of tax rules and filings across multiple states."

But Sen. Dick Durbin, D-Ill., said the bill requires participating states to make it relatively easy for Internet retailers to comply. States must provide free computer software to help retailers calculate sales taxes, based on where shoppers live. States must also establish a single entity to receive Internet sales tax revenue, so retailers don't have to send them to individual counties or cities.

"We're way beyond the quill pen and ledger days," Durbin said. "Thanks to computers and thanks to software it is not that complex."

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serious wrote:
Sure it's a tax increase--and complicated. Usually each and every county has a different sales tax structure.
on April 23,2013 | 06:26AM
boshio wrote:
What does the republican's NRA say about this. Will it cause a decrease in gun sales over the internet, or will it just create another under ground network. They should ask the real leaders of american lives, other wise we may just be wasting time.
on April 23,2013 | 06:35AM
Macadamiamac wrote:
You CANNOT buy a gun via the internet. The delivery MUST be done through a licensed FFL dealer. I know, I've done it.
on April 23,2013 | 07:52AM
1local wrote:
more money for big brother...Companies like Amazon have been keeping the US postal system busy...
on April 23,2013 | 10:28AM
soundofreason wrote:
"The bill would empower states to require online retailers to collect state and local sales taxes for purchases made over the Internet. ">>> What BETTER way to chase online purchases to overseas countries/businesses. THAT'LL create some U.S. jobs! Maybe not. :/
on April 23,2013 | 06:27AM
Bdpapa wrote:
I don't like paying it, but it's only fair.
on April 23,2013 | 06:29AM
soundofreason wrote:
Then the brainwashing is complete. You have succumbed to the notion that we "deserve" to be taxed......again....on income that we were already taxed on when we received it.
on April 23,2013 | 07:21AM
Bdpapa wrote:
It's the GET. If internet shoppers don't pay, it hurts local businesses.
on April 23,2013 | 08:39AM
bobbob wrote:
This law preys on the ignorant. Internet Sales are already subject to shipping and handling charges, which can be equal or greater than a sales tax. Additionally, is already more expensive to have items shipped to hawaii from many vendors. And now you're making it more expensive. ............. This bill is favored by big business because they can keep up with the tax law in the roughly 3000 tax jurisdictions in the us, while small businesses cannot. ....... Hawaii has 5 counties with 2 different rates with specific get laws. Now imagine 3000 jurisdictions across different cities, states, counties, all with differing laws....
on April 23,2013 | 08:57AM
Usagi336 wrote:
You're right. It's already a burden for businesses online to ship to Hawaii. A lot of them will decide it's just not worth it to do business with Hawaii if there's another hurdle to overcome.
on April 23,2013 | 09:09AM
nodaddynotthebelt wrote:
No, the GET, is by definition of economics, a regressive tax. It unfairly taxes the poor in terms of their income to tax ratio. Further, adding a sales tax to an already expensive cost of shipping will result in many small online retailers going out of business simply because they will have to hire accountants to do their taxes. If anything, the big retailers who do business online such as Walmart should be able to collect the taxes and then send them to their respective states. Many sellers online are small and do not have the means to handle the complexities of each state's sales tax laws. Further, many of these sellers are simply consumers trying to sell their excess things. The GET hurts local business. Not the other way around.
on April 23,2013 | 12:22PM
soundofreason wrote:
"States must provide free computer software to help retailers calculate sales taxes, based on where shoppers live. ">>> Free in political lingo for "taxpayer funded". Not free.
on April 23,2013 | 06:30AM
sayer wrote:
Even if the software is "free" - how about the time and energy learning how to use it, fixing it when it crashes and so forth?
on April 23,2013 | 08:26AM
bobbob wrote:
Even discounting the County level taxes, it means that you wouldhave to be familiar with sales tax laws in 50 different states. Tax software or not, it would be a huge Burden. Imagine filing 50 1040 returns every year, all with different rules. The only ones to benefit from this is huge companies like walmart
on April 23,2013 | 09:04AM
vankuren50 wrote:
Senator Dick Durbin a democrat senator who never saw a tax like most Democrats that he didn't like. Raised social security tax average $30 dollars less per paycheck for each hardworking American, sequester losses because our government is dysfunctional more pain inflicted on the American public because of incompetent politicians now lt's tax them even more by going after the internet and small businesses because the big boys who donate to these loser politicians want I and they are willing to sell us out cheaply.
on April 23,2013 | 06:35AM
mikethenovice wrote:
Strike another win for the Republican Gipper! Since they don't want to pay their fair of taxes, they have the rest of American paying for them like this online tax. What other taxes would the GOP want us pay for them?
on April 23,2013 | 07:08AM
soundofreason wrote:
I want take you shopping along with my mother in law to Costco. And since you probably make 3 times more than she does, I'd like you to pay........accordingly..........at the checkout. We'll see if you change your tune then on "what's fair".
on April 23,2013 | 07:25AM
mikethenovice wrote:
Online Tax coupled with the shipping cost will make it not feasible to compete with the brick stores.
on April 23,2013 | 07:10AM
loquaciousone wrote:
Hawaii does not have a sales tax but when I buy on line, I see and itemized tax on my bill.
on April 23,2013 | 07:28AM
Check again. Hawaii does have a sales tax.
on April 23,2013 | 07:44AM
Maneki_Neko wrote:
No it does not. Hawaii has a General Excise Tax, a regressive tax that extracts money at each step of a transaction from manufacturer to wholesaler to retailer to consumer. This is very different from a sales tax which applies only to the end-user transaction. The Hawaii GET at 4.5% (w/rail component) is equivalent to over 11% sales tax and because it applies to everything from medicine to groceries it is hugely damaging to those on the lower economic levels.
on April 23,2013 | 07:55AM
loquaciousone wrote:
nyuk nyuk nyuk. I was wondering how long before the first bite.
on April 23,2013 | 08:07AM
typroctor wrote:
tax increase nope nope nope.
on April 23,2013 | 07:45AM
Macadamiamac wrote:
What B.S. But to be fair, Hawaii doesn't have a "sales" tax. It's the General Excise Tax and it is supposed to be paid by the seller, but the B&M sellers pass the tax onto the buyer. That's 4%. Then the Seller adds 0.16% to the 4% so his price isn't decremented. Then the Hanneman's Folly conned the legislature into tacking on 0.5% to the G.E.T. to pay for the shopping center train which no one will ride. So on paper Oahu dwellers pay 4.5%, but in reality we pay 4.712%. So in reality Hawaii, and especially Oahu does have a sales tax. If the politicians succeed in passing this bill, you pockets will again be a little bit lighter, plus shipping and handling.
on April 23,2013 | 07:59AM
mustangguru wrote:
Do you know why many purchase on the internet? Variety and many items that you cannot get here even if you begged a retailer for it. We in Hawaii were accustomed to ordering through local retailers, yet to have items come months later, and you were pretty much stuck with it. With the advent of the internet, we now have choices. This tax is not a surprise folks, the general excise law has the use tax which taxes for items you consume outside of Hawaii 4% plus if you add on the train tax another 0.5%. Every item we purchase from outside of Hawaii has this imposed on it, yet very few of us have ever paid it. The use tax was supposed to bring that parity but enforcement is extremely difficult. Now because a lot of exemptions from GE and Use tax were taken away because of the budget shortfall a few years ago, will now the State begin more enforcement of the use tax law? Plus since no exemptions for this, you would be forced to pay at the point of sale, and then pay another general excise tax once it gets here (that I'm sure everyone will pay their fair share of). This is going to sharply curtail internet purchases not only in Hawaii, but all over the mainland as well. Also what about purchases from overseas? Gotta have that too "just to be fair". Hong Kong, Japan, Korea, etc. etc., what about that? So now accounting systems will require tax calculations for 50 states, plus cities, counties, townships, etc? Guess what folks, a national sales tax is soon to follow.
on April 23,2013 | 08:49AM
bobbob wrote:
Wow someone that actually gets it. And once a tax is started, it's a lot easier to increase and modify it. The social security tax was once only 1%, tax deductible, and optional. Now the full tax on employee and employer is 12.4%, not deductible and not optional.
on April 23,2013 | 09:13AM
kainalu wrote:
Just another way to separate you from your hard-earned money.
on April 23,2013 | 09:52AM
residenttaxpayer wrote:
That pretty much sums it up.....
on April 23,2013 | 12:05PM
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