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Taxation

State and Local Groups Urge Congress to Pass Online Sales Tax Bill

WASHINGTON — State and local groups are aggressively lobbying Congress in the remaining few days of the lame duck session to pass legislation sponsored by three Senators that would allow governments to collect taxes from online sales.

Still recovering from the recession and worried about further cuts in federal funding that could be made next year if Congress does not reach a deal to avoid sequestration, states would be able to collect approximately $23 billion in state sales taxes owed from online sales, according to the National Conference of State Legislatures.

Earlier this week Sens. Dick Durbin, D-Ill., Mike Enzi, R-Wyo., and Lamar Alexander R-Tenn., filed an amendment to the National Defense Authorization Act for Fiscal Year 2013 (S.3254) that is similar to the Market Fairness Act, the online sales tax bill that Enzi introduced a year ago. Durbin and Alexander are cosponsors of that bill.

The Senate has been debating amendments to the defense bill this week but has not yet voted on one containing the online sales tax language. Voting on the bill was halted Friday but will resume Monday. However, it is unclear if or when that amendment would come to the floor for a vote.

The National Retail Federation sent a one-page letter to Senate Majority Leader Harry Reid, D-Nev. and Senate Minority Leader Mitch McConnell, R-Ky. on Friday, urging them to support the Durbin-Enzi-Alexander amendment because it “addresses the current sales tax collection disparity that gives remote sellers an unfair price advantage over main street retailers.”

The Market Fairness Act was originally introduced in November 2011 and referred to the Senate Finance Committee. 

Congress had been debating an online sales tax law for two decades since a 1992 Supreme Court ruling in Quill Corp. v. North Dakota that said states can only require an out-of-state seller to collect taxes on residents if the seller has a physical presence in the state.

Other groups such as the Alliance for Main Street Fairness, the Government Finance Officers Association, the NCSL, and the U.S. Conference of Mayors have been instructing their members to contact their state Senators to support efforts to bring the amendment up for a vote.

“For over 30 years, state and local governments have been calling on Congress to allow for the collection of taxes on remote sales,” said Susan Gaffney, director of GFOA’s federal liaison center. “Whether an item is purchased in a physical store or online, governments should receive the applicable sales and use taxes. GFOA and other state and local governments are very supportive of these efforts and are hopeful that Congress will finally pass this important and much needed legislation.”

The Alliance for Main Street Fairness sent an email to members Friday saying,  “E-fairness is within our reach — we just need one, final push.”

On behalf of the NCSL, state legislators will descend on Capitol Hill next Wednesday to hear from the sponsors of the online sales tax bill and then individually meet with other lawmakers to urge them pass the bill.

The groups’ message comes at a time when online sales have skyrocketed this holiday season. “Cyber Monday” was the heaviest online spending day in history. Online sales reached $1.47 billion, up 17% from last year, according to the research firm comScore.

Online sales on “Black Friday” topped $1 billion for the first time in history, a 26% increase over last year, according to comScore.

“As the nature of retailing evolves and internet sales become a more prominent portion of total retail sales, it is critical that sales tax collection requirements not discriminate between similar businesses based on how their products are distributed,” the NRF wrote in its letter.

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