Fort Worth Star-Telegram
In an effort to level the playing field between brick-and-mortar stores and online retailers, the U.S. Senate fast-tracked its Market Place Fairness Act and overwhelmingly approved it Monday, setting the stage for an intense battle in the House.
On a vote of 69-27, senators approved the bill authorizing states to collect sales taxes on items bought from out of state over the Internet, a change large retailers and local and state governments have been advocating for years.
Current law requires online retailers to collect taxes if they have a physical plant or office in a state, an issue over which Amazon.com had a long-running dispute with Texas before settling it last year. Comptroller Susan Combs had estimated that the online giant owed the state $269 million of uncollected sales taxes over five years.
The National Conference of State Legislators calculated that the states collectively lost about $23 billion in sales taxes last year, based on a Commerce Department estimate of $225.5 billion in online sales in 2012.
The Senate bill would exempt small businesses — those with out-of-state revenues of $1 million or less — from collecting sales taxes. Opponents of the bill said it would be too onerous for small companies to deal with 45 sales-tax-collecting states and thousands of counties and municipalities.
The legislation would require states to provide Internet businesses with free software to calculate the taxes owed and designate a single agency to collect the taxes.
Several House Republican leaders said they plan to fight the bill. They consider any additional tax, even if it was already owed, a “new tax.” And they almost certainly will insist, as did some senators, that a “small business” be defined as one making more than $10 million in revenue or having fewer than 50 employees.
When Internet sales started, it made sense to exempt sales tax collections to give online businesses a chance to thrive. But now the exemption causes an unfair and no-longer-justified tax disparity between brick-and-mortar stores and Internet retailers. The Senate has rightly moved to correct that inequity, and the House should follow suit.