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Internet sales tax embraced by no-tax Republicans

By Stephen Ohlemacher

Associated Press

LAST UPDATED: 10:15 a.m. HST, Apr 25, 2013

WASHINGTON » You don't see this very often: a majority of Senate Republicans voting to make people who buy stuff on the Internet pay state and local sales taxes.

Anti-tax guru Grover Norquist isn't happy about it, and the conservative Heritage Foundation is questioning the senators' conservative credentials. But the issue of taxing Internet sales is getting strong support from Republicans and Democrats alike.

The Senate could vote as early as today on a bill to empower states to require online retailers to collect state and local sales taxes for purchases made over the Internet. Under the bill, the sales taxes would be sent to the states where a shopper lives.

On Wednesday, the bill passed a test vote in the Senate, 74 to 23, with 27 Republicans voting in favor. Senators were trying to work out agreements today on potential amendments and the timing of a final vote.

If they can't reach agreement to vote earlier, Senate Majority Leader Harry Reid, D-Nev., said, the Senate will vote Friday morning to end the debate. The Senate is scheduled to go on vacation next week, and Reid vowed today to pass the bill before senators leave town.

"This is a matter of equity and fairness," said South Dakota Gov. Dennis Daugaard, a Republican. "The same people who are selling the same products should be paying the same taxes."

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 an advantage over brick-and-mortar stores.

It is part of GOP orthodoxy to oppose higher taxes, a central issue that divides Democrats and Republicans. That's why the bill faces an uncertain fate in the House, where some Republicans regard it as a tax increase.

But supporters of the bill insist it is not a tax increase. Instead, they say, the bill merely provides states with a mechanism to enforce current taxes.

"This bill has nothing to do with imposing any kind of new tax or revenue generator," said Sen. Bob Corker, R-Tenn. "What this law does is allow states that already have laws on the books to carry out the implementation of those" laws.

In many states, shoppers are required to pay unpaid sales taxes when they file their state income tax returns. In South Dakota, which has no state income tax, taxpayers are supposed to pay a use tax on out-of-state purchases. But Daugaard said the law is widely ignored.

"The difficulty is consumers don't understand the law," Daugaard said. "I think that's true in many other states as well."

The bill's main sponsor is Sen. Mike Enzi, a conservative Republican from Wyoming. He is working closely with Sen. Dick Durbin, a liberal Democrat from Illinois. Both senators say the bill is about fairness for local businesses that already collect sales taxes, and lost revenue for states.

Opponents say the bill 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.

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.

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 National Conference of State Legislatures estimates that states lost $23 billion last year because they couldn't collect taxes on out-of-state sales.

Daugaard estimates that South Dakota loses $48 million to $58 million a year, important revenue for a state that doesn't have an income tax.

The main opposition in the Senate is coming from three states that have no sales taxes: New Hampshire, Montana and Oregon. Delaware doesn't have a sales tax, either, but both Delaware senators have voted to advance the bill.

"We don't like the idea of other states auditing our businesses," said Sen. Jeff Merkley, D-Ore. "They don't like the idea of being subject to both bureaucrats and potential legal action."

Norquist, president of Americans for Tax Reform, says the bill is about "money-hungry state legislators."

"This is a dangerous road to travel, and sets precedent for further expansions of state-level tax collection authority," Norquist says in a letter to supporters. "Take action now to urge your senators to oppose an Internet sales tax scheme that lets liberal states like California and Illinois tax across their borders!"

The Heritage Foundation says that "real conservatives" oppose the bill and that it would hurt online commerce, force small businesses to jump through new bureaucratic hoops and erode state sovereignty.

But Republican Sen. Lamar Alexander, a former Tennessee governor, said the bill enhances states' rights because it gives states the authority to enforce their tax laws.

"Tennessee wants to avoid a state income tax and treat businesses fairly in the marketplace, and it shouldn't have to play 'Mother, May I?' with the federal government to do so," Alexander said.

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cojef wrote:
The majority of States have sale tax provisions, notwithstanding, meddling into States rights, the Congress will pass this bill because Amazon will benefit the most from this bill as it will level the playing field as far as they concerned. They were opposed to collecting sales taxes until the State of California made them collect sales taxes on sale outside California starting last year, until then they did not collect any taxes on out State sales. Then, when they had to collect sales taxes within as well as out, they were at a disadvantage to other on-line retailers in other States. Then they changed their tune. Atypical business decision.
on April 25,2013 | 10:33AM
thebostitch wrote:
Here is a paragraph from today's Rush Limbaugh's regarding the Internet Tax; I totally agree with what Rush had to say: [ Rush: - So we see a proposal to raise taxes on the Internet, we say, "No way!" The American people are paying enough! American business is paying enough! There is no justification for raising taxes! It isn't our fault that people spending the money have been so irresponsible. Maybe people on welfare are playing a role because they're demanding all these benefits, but it isn't our fault here. We think that when a tax increase is proposed it automatically ought to be opposed. And instead of saying, "Okay, yeah, we agree, the brick and mortar guys have a certain burden. It's not fair the Internet guys don't have that burden, so let's raise taxes on the Internet guys and burden them, too." We say, "Not only do we not impose new taxes on the Internet guys, let's cut taxes on the brick and mortar guys. Let's get rid of some of this business regulation. Let's get rid of some of this onerous regulatory system that puts the brakes on progress."].
on April 25,2013 | 10:33AM
control wrote:
That onerous regulatory system came about because of businesses behaving badly. Too many seem to think free market means free to do what every they want no matter who gets hurt or shafted in the process.
on April 25,2013 | 01:17PM
Wahiawamauka wrote:
If someone buys something from another state why should they pay taxes here in Hawaii?? Sen. Lamar Alexander is full of B.S. "enhance states rights" LOL. It is just another way for the government to take our money.
on April 25,2013 | 02:47PM
sailfish1 wrote:
Why don't government go after all the people who don't pay income taxes? If they collected all of that they would have plenty of money and wouldn't have to keep making new tax laws. As a matter of fact, the country probably wouldn't have a budget crisis. Just enforce what is already in place and quit complicating matters.
on April 25,2013 | 04:44PM
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