WASHINGTON — Internet purchases soon could cost more, with the Senate set to decide later this week whether to allow states to collect sales taxes on online purchases.
Debate on the legislation, called the Marketplace Fairness Act, continued Tuesday after the Senate voted 74-20 late Monday to move forward with consideration of the bill and various amendments.
The legislation is backed by retailers who argue they are at a disadvantage to online businesses selling items cheaper because state and local sales taxes usually are not applied.
Critics contend the legislation is an effective tax increase on average Americans and the bill is an unfair extension of local laws onto global Internet commerce.
The legislation has the support of President Barack Obama.
Sens. Mary Landrieu, D-La., and David Vitter, R-La., are divided on the issue, with Landrieu arguing the bill helps level the playing field for businesses and Vitter pointing out it will cost many people more in taxes.
The nonprofit National Conference on State Legislatures, which backs the bill, estimates $23 billion of sales tax revenue nationwide is not collected and remitted by Internet vendors; in Louisiana, an estimated $808 million of state sales tax revenue goes uncollected annually.
“This legislation is about leveling the playing field for all our retailers and small businesses, whether they’re on Government Street in Baton Rouge, Magazine Street in New Orleans or MacArthur Drive in Alexandria,” Landrieu, who is a co-sponsor of the bill, said in an email response.
“Louisiana businesses play by the rules, and they should not be put at a disadvantage against large, out-of-state, online companies,” she said.
Despite his opposition, Vitter said in an email that he remains “sympathetic to the fairness argument of retail store owners.”
“But overall, this would be an effective tax increase on Louisiana and this would put a big burden on many smaller businesses that would have to deal with thousands of different taxing jurisdictions around the country with their own sales tax rates, with some rates changing every year,” Vitter said.
Gov. Bobby Jindal also opposes the legislation under the argument he is against any net tax increases on Louisianians.
Support for the bill should be “obvious” because it simply means enforcing existing laws in a way that helps local businesses and government, according to Adam Knapp, president and chief executive officer of the Baton Rouge Area Chamber.
“In our state, it’s already law it (a sales tax for online purchases) has to be paid. It’s just not being collected,” Knapp said.
“The only way it gets fixed is if the feds do something,” Knapp added. “It’s the proper way to do things in a world that’s going to a much more fluid way of sales.”
Sen. Dick Durbin, D-Ill., was among those making the fairness argument for retailers with physical stores.
He said many people will go to stores to try products out, then buy them online instead to avoid paying sales taxes.
“It’s called ‘showrooming,’ and it’s happening more and more,” Durbin said. “Why would somebody try the shoes on and not buy them? Go to the Internet. In many instances, it’s because many Internet retailers do not collect sales tax.”
Others such as Sen. Kelly Ayotte, R-N.H., called the bill unfair for average people and many businesses that have a lot of online commerce.
“I’d like to appropriately name it the Internet Tax Collection bill, because that’s what it is,” Ayotte said.
He said it would create an “administrative nightmare” for businesses to keep up with.
The slightly tweaked Marketplace Fairness Act would give states the option to require the collection of sales and use taxes by out-of-state sellers.
The bill exempts retailers who have out-of-state sales of $1 million or less. That’s up from $500,000 in past bills, a change made to avoid burdening small retailers to having to collect the tax.
The bill would overturn a 1992 U.S. Supreme Court decision that found states cannot reach beyond their borders and require out-of-state Internet vendors to collect the sales and use tax owed by state residents and businesses.