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Wayne Post
  • Sales tax for all online buys?

  • A bill allowing states to require out-of-state retailers to collect sales taxes for Internet, catalog and other purchases faces tough going in the House.

     

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  • Traditional retailers and cash-strapped states face a tough sell in the House as they lobby Congress to limit tax-free shopping on the Internet. But whatever the outcome, local business owners are poised to take it all in stride.
    The U.S. Senate voted 69 to 27 Monday to pass a bill that empowers states to collect sales taxes from Internet purchases. Under the bill, states could require out-of-state retailers to collect sales taxes when they sell products over the Internet, in catalogs, and through radio and TV ads. The sales taxes would be sent to the states where a shopper lives.
    At Davidson Shoes in Canandaigua, owner and president Mark Hogan said the legislation, if passed, would make little difference to his business, which is split 50/50 between online and in-store sales.
    “I don’t think it would have that great of an impact, as long as it is across the board and they collect sales tax from all Internet vendors,” Hogan said. “It would have to be all or nothing. If you’re going to collect it, collect it from everyone.”
    'Leveling the playing field'
    Current law says states can only require retailers to collect sales taxes if the merchant has a physical presence in the state. That means big retailers with stores all over the country like Walmart, Best Buy and Target collect sales taxes when they sell goods over the Internet. But online retailers like eBay and Amazon don’t have to collect sales taxes, except in states where they have offices or distribution centers.
    “This bill is about fairness,” said Sen. Mike Enzi, R-Wyo., the bill’s main sponsor in the Senate. “It’s about leveling the playing field between the brick-and-mortar and online companies and it’s about collecting a tax that’s already due. It’s not about raising taxes.”
    Laurie Arner, project manager at the Country Ewe in Canandaigua, said her store represents both ends of the spectrum.
    “We’re online and brick-and-mortar too,” said Arner. “But we understand — the tax burden is all of ours to share. One way or the other we’re not opposed to paying our share. We see the benefit for us, but we also know it’s going to affect our sales in some aspects.”
    Although it may mean added expense to her business, she’s still avidly pursuing the Internet market.
    “Obviously it will create more labor for our bookkeeping,” said Arner. “We’ll have to file a lot more paperwork. It’s going to cost us more money because we’ll have to file taxes in every single state where we sell. About 25 percent of our business is online sales. We ship internationally, so we continue to hope our business is there, and we’re looking to grow that this year. We’re actually putting a campaign together this year to promote that web business.”
    Page 2 of 3 - Hogan said consumers by and large like the convenience of online shopping, and won’t be swayed by additional sales tax. The bottom line, he said, is really all about raising revenue.
    “The government is starved for revenue, and that’s what it’s all about anyway,” Hogan said. “If they don’t get it from sales tax, they’ll need to get it from somewhere else. I have always wondered personally how they could let it go this long.”
    'A long way to go'
    The bill got bipartisan support in the Senate but faces opposition in the House, where some lawmakers regard it as a tax increase. Supporters say the bill is not a tax increase. In many states, shoppers are required to pay unpaid sales tax when they file their state tax returns. However, states complain that few taxpayers comply.
    “Obviously there’s a lot of consumers out there that have been accustomed to not having to pay any taxes, believing that they don’t have to pay any taxes,” said Rep. Steve Womack, R-Ark., the bill’s main sponsor in the House. “I totally understand that, and I think a lot of our members understand that. There’s a lot of political difficulty getting through the fog of it looking like a tax increase.”
    On Tuesday, House Speaker John Boehner, R-Ohio, declined to say whether the House would take up the bill, deferring to the House Judiciary Committee, which has jurisdiction over the legislation. Committee Chairman Bob Goodlatte, R-Va., said there are problems with the bill but he did not reject it outright.
    “While it attempts to make tax collection simpler, it still has a long way to go,” Goodlatte said in a statement. Without more uniformity in the bill, he said, “businesses would still be forced to wade through potentially hundreds of tax rates and a host of different tax codes and definitions.”
    Goodlatte said he’s “open to considering legislation concerning this topic but these issues, along with others, would certainly have to be addressed.”
    Internet giant eBay led the fight against the bill in the Senate, along with lawmakers from states with no sales tax and several prominent anti-tax groups. The bill’s opponents say it would put an expensive obligation on small businesses because they are not as equipped as national merchandisers to collect and remit sales taxes at the multitude of state rates.
    Businesses with less than $1 million in online sales would be exempt. EBay wants to exempt businesses with up to $10 million in sales or fewer than 50 employees.
    “The contentious debate in the Senate shows that a lot more work needs to be done to get the Internet sales tax issue right, including ensuring that small businesses using the Internet are protected from new burdens that harm their ability to compete and grow,” said Brian Bieron, eBay’s senior director of global public policy.
    Page 3 of 3 - Some states have sales taxes as high as 7 percent, plus city and county taxes that can push the combined rate even higher.
    Many 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 government estimates.
    States lost a total of $23 billion last year because they couldn’t collect taxes on out-of-state sales, according to a study done for the National Conference of State Legislatures, which has lobbied for the bill. About half of that was lost from Internet sales; half from purchases made through catalogs, mail orders and telephone orders, the study said.
    Supporters say the bill makes it relatively easy for Internet retailers to comply. States must provide free computer software to help retailers calculate sales taxes, based on where shoppers live. States must also establish a single entity to receive Internet sales tax revenue, so retailers don’t have to send it to individual counties or cities.
    “People adapt to whatever is thrown at them,” Hogan said. “It’s not that difficult if you have the right software. If you’re doing enough online business and you can’t adapt you probably shouldn't be online.”
    — Includes reporting by Associated Press writer Stephen Ohlemacher
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