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Although several efforts to force Internet retailers to collect state sale tax have failed in the past, advocates say new legislation this year just might become law. A big reason for the change: A sales tax law would be a way for Washington to financially assist states without spending federal tax dollars.
Another bill to force all Internet retailers to collect sales tax is headed to Congress. And with many states starved of tax revenue in the economic downturn, this bill has a greater chance than earlier versions of becoming law, advocates say.
“We expect we’ll see more progress in Congress, and possibly even enactment, because this is something the federal government can do for the states that doesn’t cost the federal treasury a penny,” says Neil Osten, federal affairs counsel of the National Conference of State Legislators, which supports the bill.
Osten says the Senate sponsor of the bill will be Mike Enzi, a Republican from Wyoming, and, in the House, Massachusetts Democrat Rep. Bill Delahunt.
Until now, retailers have only had to collect and remit sales taxes on web sales in states in which they have a physical location. The bill would enable states that have complied with the Streamlined Sales Tax initiative, which standardizes sales tax rules across states, to require all online retailers to collect and remit sales tax from consumers who live in those states.
To date, 22 states have complied with SST, and Wisconsin has applied to the SST governing board to be certified as the 23rd. In all, 45 states have sales taxes.
A University of Tennessee study estimates that state and local governments will miss out on between $11.4 billion and $12.65 billion in uncollected sales tax by 2012 if there is no change in the law. That is based on a broad definition of e-commerce that includes business-to-business sales, which the Tennessee researchers calculate constitute 93% of online transaction value.