Private investment firm Comvest Partners acquires the financially troubled e-retailer, which filed for Chapter 11 bankruptcy protection in March.
Sen. Dick Durbin introduces a bill that would require all retailers to collect sales tax.
U.S. Sen. Dick Durbin (D-Illinois) today introduced a bill that would require all retailers to collect sales tax. If passed, the legislation would overturn the status quo backed by a 1992 Supreme Court decision that prevents states from forcing Internet retailers to collect sales tax unless they have an in-state physical presence.
“Main Street retailers collect sales taxes on behalf of consumers, why shouldn’t online retailers do the same?” Durbin said in announcing his legislation. “In 2012, states across the country, including Illinois, are expected to lose as much as $24 billion in uncollected state and local taxes on internet and catalogue sales. From 2005 to 2010 the state of Illinois estimated it lost $153 million each year. The Main Street Fairness Act doesn’t ask anyone to pay a single penny more in taxes. Instead, it would help governors and mayors collect taxes that are already owed.”
The bill was applauded today by both Amazon.com Inc. and the National Retail Federation, a trade group for bricks-and-mortar retailers.
The legislation is designed to authorize states to mandate sales tax collection by all retailers if the states participate in the Streamlined Sales Tax Project, or SST, which is an effort under which states are simplifying their sales tax laws to make it easier for retailers to collect sales tax across multiple states. There are 45 states plus the District of Columbia with a state sales tax; in Alaska, sales tax is charge by some cities. More than 20 states currently participate in the SST.
In a letter today to Durbin, Amazon’s vice president for global public policy, Paul Misener, wrote, “Thank you for your bill that would allow states that sufficiently simplify their rules to require collection of sales tax by out-of-state sellers … Amazon looks forward to working with you and your colleagues in Congress to help enact sales tax legislation.”
David French, senior vice president for government relations at the NRF, many of whose members already collect sales tax on web transactions because they operate physical stores, says the bill will create a more level playing field for all retailers regarding the prices they charge to customers. “We believe there should be a level playing field where all retailers follow the same rules regardless of whether they sell their merchandise in a bricks-and-mortar store, through the mail or online,” he says. “This bill would end a situation where Internet sellers have held an unfair price advantage over local stores for far too long. Tax policy should be channel neutral and not favor one segment of an industry over another.”
Other retail groups, however, including the Direct Marketing Association and the online retail group NetChoice, contend that a nationwide sales tax would stifle e-commerce—which for many multichannel retailers is their fastest growing channel. While Durbin cites a study from the University of Tennessee that projects states could gain more than $23 billion in revenue by 2012 through a nationwide Internet retail sales tax system, other studies put that estimate much lower.
Brian Bieron, senior director, federal government relations and global public policy at eBay Inc., which operates the world’s largest e-marketplace for mostly small independent sellers, says the Main Street Fairness bill would hurt small retailers. “The giant retailers jockeying for new Internet sales taxes have national store networks that they combine with their major online sales platforms, a business model they know brings some tax collection duties,” he says. “Forcing small businesses to take on the same costs and tax burdens as national retail businesses is unrealistic, unfair and will unbalance the playing field between giant retailers and small business retailers on the Internet.”