Durbin introduces online tax bill, has Amazon support

Sen. Dick Durbin (D-Ill.) will introduce a bill on Friday to allow states to require online retailers to collect sales taxes.

Sens. Tim Johnson (D-S.D.) and Jack Reed (D- R.I.) will co-sponsor the bill, titled the Main Street Fairness Act. Reps. John Conyers (D-Mich.) and Peter Welch (D-Vt.) will introduce a companion bill in the House.

Supporters of the bill argue it will close a loophole that allows online purchases to go untaxed, giving an advantage to online retailers over traditional, brick-and-mortar stores.

“Our bill levels the playing field to give Main Street businesses a fighting chance,” Welch said. “When a consumer can walk into a store, try out a product and then go home and buy it online without paying sales tax, Main Street businesses and downtowns lose."

The retail trade groups National Retail Federation, International Council of Shopping Centers and Retail Industry Leaders Association support the measure.

The lawmakers argue the bill will allow state and local governments to collect more taxes and close budget shortfalls.

“Between 2009 and 2012, states across the country, including Illinois, are expected to lose as much as $37 billion in uncollected state and local taxes on internet and catalogue sales,” Durbin said in a statement. “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.”

Amazon opposed a California online sales tax law and is leading the effort to overturn it. The online retailer, however, supports Durbin’s bill, arguing a nationwide system of sales tax collection is preferable to a patchwork of laws.

“Amazon.com has long supported a simple, nationwide system of state and local sales tax collection, evenhandedly applied to all sellers, no matter their business model, location, or level of remote sale,” said Paul Misen, Amazon’s vice president for global public policy.

The Computer & Communications Industry Association, a trade group, opposes the bill.

“E-commerce has enabled businesses to broaden the scope of their activities beyond traditional geographic limitations," said Ed Black, president of CCIA. "Sadly, this bill seeks to reimpose onto e-commerce businesses the very burdens that innovation has enabled them to overcome and has given them a chance for success."

Online auction site eBay also released a statement Friday bashing Durbin's proposal.

“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," said Brian Bieron, director of government relations at eBay.

"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.”

To be COMPLETELY fair then, the main street stores should have to charge the equivalent of a “shipping fee”...you know to compensate the government for the use of the highways and airways used to get the product from where it was made to the store that sells it. Just watch. They can find a way to rationalize ANY tax or fee to seem “reasonable.” FAIRNESS is an unreachable goal and is just a phoney reason to do lots of not so good things in its name.

I will not buy things online and pay for shipping PLUS tax. Nor would I buy the same item on main street because it is too hard to find it. Easily located and often used items are already purchased on main street. Oh and what about those itunes downloads, Kindle books, ebay from private vendors, etc. Coming soon, tax garage sale purchases, tax Craigs’ List purchases and throw people who barter into jail, right?

What I find interesting about the coverage of this new bill is that nobody is publishing any details about the bill. So it's very hard to discuss the bill on its merits without something to reference. As for some of the comments posted here:

Brick-and-mortar have to build "shipping costs" into their prices, because the good have to get to their stores somehow. Remote suppliers explicitly charge for shipping (and usually give the buyer an option). So much for "shipping costing being a leveler."
Government service have to be paid for somehow. Many places use consumption taxes on non-essentials to avoid putting an undue burden on the poor while meeting the need for money. This proposal tries to have each resident of a locale pay "their fair share" -- remember that the residents control that share by voting, and being locally represented.
For brick-and-mortar outlets, the tax is is based on where the store is physically located, not where the customer lives. The so-called Internet tax disrupts this model because a seller can be located in an area with no consumption tax. Out-of-area and out-of-state buyers pay the local rate, even when they don't live there. In some cases, such as automobile purchases, the out-of-state buyer gets nicked twice, first at point-of-sale, and again in his/her home state.

The core of the whole problem is that, across the country, we have a crazy-quilt hodge-podge of consumption taxes, so complex that even a single five-digit postal ZIP code can have multiple tax rates applied to it. The table of tax rates changes daily, because some locations permit changes to be made by ordinance, not election, in particular in "special-use" zones that can come and go.

Finally, to whom does the out-of-state operator pay the tax? Are there fifty checks each month? Tens of thousands of checks each month? And how about the paperwork -- how many different forms are involved?

Remember that the Constitution allows Congress to regulate inter-state commerce, so providing a scheme for simplifying the problems of states having the use tax be picked up by the remote seller is within the four corners of that document. It's not that the proposal law attempts to levy a tax -- the citizen of a state is required, by state law, to pay the tax. That's law in many places. The rub is how the payment is collected. What the proposal does is make the remote seller the collection agent, the same as the brick-and-mortar seller is a collection agent.

The whole idea of "presence" or "nexus" is that someone who lives in the taxing area involved can know the tax rate structure, just like the brick-and-mortar store knows the tax rate structure. It's less of a burden to the seller to have the tax calculated by an entity in the tax zone, particularly if the satellite office or affiliate collects the tax and submits the paperwork. That's why Amazon is closing down warehouses and shutting out certain affiliates -- it eliminates any claim of "nexus" and knowledge of local tax rates.

Some of the earlier proposals tried to go beyond simplification. Other proposals limited themselves to trying to reduce the burden on the remote out-of-state sellers to track sales tax by address. Remember that taxes can be by state, county, city, town, village, school district, park district, "improvement" district, and I don't know what-all. The current system, make the buyer pay, isn't working out all that well -- too many people don't even know they have to pay the "use tax" because they never heard of it. Not to mention the nightmare many states have for paying tax -- here in Nevada, with no income tax, you have to know to get a special form that is not available in the Post Office. Frankly, I'm not even sure where to go to get one. (Glad I don't do mail-order buying!)

There are still a lot of questions I have about the proposal. I think it's too soon to try to attack it.

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