April 22, 2013, 5:29 PM

Sales tax bill advances after Obama offers support

The U.S. Senate votes to move ahead with a debate on online sales tax.

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The U.S. Senate voted 74 – 20 late today to move forward with a debate on a bill that would broadly increase the collection of online sales tax by Internet and catalog retailers. The bill could come to a final vote in the Senate later this week.

Today's vote was almost identical to the Senate's vote last month on a nonbinding resolution that supported the sales tax bill.

The vote followed the Obama Administration’s endorsement earlier in the day of the legislation before the Senate, known as the Marketplace Fairness Act, or Senate bill S. 743.

“The Administration strongly supports S. 743, which will level the playing field for local small business retailers that are in competition every day with large out-of-state online companies,” the White House said in a statement.

The White House went on to say that the current system, under which many online and catalog retailers don’t collect sales tax, has created a disparity that “undermines the ability of cities and states to invest in K-12 education, police and fire protection, access to affordable health care, and funding for roads and bridges.” At the same time, it adds, “Internet-facilitated sales continue to grow as a share of total transactions, contributing to ongoing state budget pressures.”

In addition, the Obama Administration contends that “collection technologies have improved and states have made significant strides to cut red tape and simplify their tax systems.”

Supporters of the Marketplace Fairness Act say it’s significant the Obama Administration came out in support of the bill today, even if it’s too soon to say how its support might affect arguments and actions by members of Congress.  “We find the administration’s first comment on the bill a very positive step, but we’ll have to see the results” in any Congressional action, says a spokesman for the National Retail Federation, an industry group of retail chains that supports the bill.

But Steve DelBianco, executive director of NetChoice, a group respresenting eBay Inc., Overstock.com Inc. and other e-retailers opposed to the bill, says he doubts that support by the White House will help to get the bill enacted. “White House endorsement shouldn’t give senators much comfort, given the backlash from the Administration’s last attempt to impose new burdens and barriers on business,” he says, referring to the 2010 Affordable Care Act, health care legislation popularly known as Obamacare.

The Marketplace Fairness Act is backed by Amazon.com Inc., which is increasingly collecting sales tax as it builds distribution centers in more states, as well as by retail chains, who contend that the bill will provide a more level playing field by requiring web-only retailers to collect sales tax. If enacted into law, the bill will overturn existing federal law that says states can only mandate sales tax collection by retailers with an in-state physical presence, or nexus in legal terms, such as stores and distribution centers. Amazon, which has been expanding its number of distribution centers to about 40 throughout the U.S., is No. 1 in the Internet Retailer Top 500.

Overstock.com, eBay and other online retail companies that oppose the bill contend that it would put an undue burden on web retailers to collect sales tax in each of the roughly 9,500 taxing jurisdictions around the country, each of which has its own rates and rules about which items are subject to sales tax.

The bill exempts retailers that do less than $1 million in annual remote sales, or sales to customers in states where the retailer has no physical presence.

Although sponsors of the bill, including Senator Dick Durbin (D, IL) say they believe the strong support in the Senate will let the bill come to a final vote this week, a spokeswoman for Durbin notes that the bill's opponents are trying to delay a vote. If the vote doesn't occur this week, it will have to come up in May after next week's recess, she says.

 

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