White House, Senators Back E-Commerce Tax Bill
The White House backed the Marketplace Fairness Act, as senators that support the bill said S-743 is needed to level the playing field between brick-and-mortar stores and online sellers. Buyers are supposed to pay in-state sales tax on out-of-state purchases through their tax returns, but states don’t have the authority to require sellers to collect and remit that tax. Critics claimed the bill would place burdens on online sellers. The Senate was scheduled to vote to invoke cloture on the bill after our deadline Monday.
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The White House released a statement in favor of the bill Monday. “This bill would eliminate the unfair advantage currently enjoyed by big out-of-state online companies over local neighborhood-based small businesses,” the statement said. Online, out-of-state businesses that don’t collect sales tax when selling to a state’s residents undermine “the ability of cities and States to invest in K-12 education, police and fire protection, access to affordable health care, and funding for roads and bridges,” the statement said. It commended the bill’s $1 million small-seller exemption and its requirement that states “make available, at no cost to retailers, software that helps calculate the State sales tax on remote transactions, as well as administrative services."
Online sellers should have to play by the rules of the states where they want to do business, Sen. Dick Durbin, D-Ill., said on the Senate floor Monday. “If you want to do business in Illinois, if you wanted to move your shoe store to Illinois, you would have to play by Illinois rules,” he said. “We think the same thing should apply when it comes to Internet sales.” Out-of-state online sellers use state resources -- such as roads and law enforcement agencies -- when conducting business with a state’s residents, Durbin said. “I don’t think that it’s unfair that they collect taxes to support the state and the city where they're making their sales,” he continued. “That UPS truck is going to use the streets of Chicago and the streets of Springfield,” the capital of his home state.
Allowing states to require companies to collect and remit sales tax on online purchases made by their residents would help the states provide the resources used by the companies, including “those first responders that we're always so conscious of, particularly today and in the last week,” said Sen. Mike Enzi, R-Wyo. “Right now, it’s not only fundamentally unfair to Main Street retailers, but it’s costing states and localities billions,” which states will attempt to recoup by raising other taxes, he said. A bill that gives states more opportunity to raise revenue without creating new taxes or raising existing ones “will give states less of an excuse to come knocking on Congress’s door for handouts,” he said.
The bill is not too complex for small businesses, Enzi said, predicting criticism from the bill’s opponents. The bill requires that states opt in and provide online sellers with software to determine applicable tax rates for each purchase, he continued. Online sellers that use the software won’t be liable for any calculation errors, he said. “Don’t let the critics get away with saying that this kind of simplification can’t be done."
The Marketplace Fairness Act is “too complex, too time consuming and too costly to comply with,” said Sen. Max Baucus, D-Mont., whose state doesn’t have a sales tax. The bill should be considered by the Senate Finance Committee, of which he is chairman, he said. “Evading the committee process quashes any attempt to improve this bill."
The bill “is bad for New Hampshire small businesses who shouldn’t be forced to collect sales taxes for other states,” said Sen. Jeanne Shaheen, D-N.H., in a statement. Her state also doesn’t have a sales tax. The Marketplace Fairness Act “would put a serious burden on small businesses that rely on the Internet to tap into growing markets, expand their operations, and create jobs” and would “overload” small businesses “with bureaucracy and red tape” as small businesses navigate the tax requirements for 9,600 jurisdictions, she said. “The Senate isn’t properly considering the ramifications of this measure.” Shaheen said she plans to introduce amendments to the bill.
EBay encouraged users to contact their members of Congress and tell them to oppose the bill. In a letter to users, CEO John Donahoe said the bill would require small businesses and eBay sellers “to collect sales taxes nationwide from the more than 9,600 tax jurisdictions across the US” and “face the prospect of being audited by out of state tax collectors. That’s just wrong, and an unnecessary burden on you.” Donahoe wrote that the small-seller exemption should be raised to include “small businesses with less than 50 employees or less than $10 million in annual out-of-state sales.”