Lost amid the rancorous debate over raising the debt ceiling, Illinois Senator Dick Durbin on Friday afternoon rolled out proposed legislation that would clear the way for a federally-mandated online sales tax in states that participate in the Streamlined Sales Tax Project (SST).
The Main Street Fairness Act would essentially reverse the Supreme Court’s 1992 decision dictating that states must rely on physical presence in determining whether or not to force web retailers to collect sales taxes. Durbin’s move promises to ramp up a heated debate at the federal level between interests on both sides of the online sales tax issue.
“Main Street retailers collect sales taxes on behalf of consumers, why shouldn’t online retailers do the same?” Durbin said during an announcement of the 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 SST figured to be the best available resource for bringing about federal control over how and where retailers can collect unpaid online sales taxes. The program is designed to help states simplify their sales tax laws to facilitate merchants’ efforts to collect sales taxes across multiple states.
More than 20 states currently participate in the SST.
In a bit of a surprise move, Amazon’s vice president for global public policy Paul Misener wrote a letter to Durbin actually praising the Main Street Fairness Act:
“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,” the letter stated. “Amazon looks forward to working with you and your colleagues in Congress to help enact sales tax legislation.”
Other retail interests weren’t nearly as excited. eBay’s senior director of government relations and global public policy Brian Bieron told Internet Retailer that the legislation would actually hurt smaller merchants, of which eBay has many.
“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,” he said.
Of course, the ‘level playing field’ angle has been one played up by brick and mortar retail interests for quite some time when debating the merit of online sales taxes. Lobbying groups like the NRF have made it their cornerstone argument in pushing for better solutions to the tax issue. As such, it’s interesting to hear eBay make the claim that a federally mandated collection program would actually hurt smaller merchants.
Nevertheless, there are other items that promise to frame the debate on the Main Street Fairness Act moving forward as well. The biggest might just be how much revenue the law, if passed, would actually generate. Durbin’s estimate is based on a recent study by the University of Tennessee but other concerned parties—namely the Direct Marketing Association and the online retail group NetChoice—have argued that figure is way too high and that a nationwide sales tax would stifle e-commerce.
We’ll keep tabs on this as new developments emerge but suffice to say it could move pretty quickly now that the debt ceiling issue is in the rearview mirror and quite a few states are facing serious budgetary shortfall questions in the coming weeks and months.
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