Internet- and Sales Tax-Related Bills Introduced

Internet- and sales tax-related bills recently introduced in the House and Senate would have impact state and local finances if they were enacted.

Rep. Steve Chabot, R-Ohio, and Sen. Kelly Ayotte, R-N.H., are sponsoring identical bills that would place a permanent moratorium on states trying to collect Internet access taxes or other “multiple and discriminatory taxes on electronic commerce.”

Chabot, a member of the Senate Small Business Committee, introduced his on Tuesday and Ayotte, a member of the Senate Commerce Committee, dropped hers a week earlier.

The two bills are opposed by state and local groups that do not like Congress dictating their taxing powers.

“We find it hard to find a public policy justification for this legislation,” said Lars Etzkorn, program director for the National League of Cities’ Center for Federal Relations. “We see this a special interest seeking special treatment from Congress.”

Ayotte announced earlier this week that she is working with Sen. Ron Wyden, D-Ore., to reintroduce a resolution expressing the sense of the Senate that no federal legislation should give states the authority to impose any new burdensome or unfair tax collecting requirements on Internet businesses and entrepreneurs.

“Online businesses should be a source of jobs, not a source of new tax revenue,” she said. “New Hampshire prides itself on having no sales tax, and our Internet retailers shouldn’t be forced to become tax collectors for other states. We need to be vigilant to preserve our tax-free status, and I will continue to fight any federal effort that would require New Hampshire Internet businesses to collect sales taxes.”

Meanwhile, Sen. Maria Cantwell, D-Wash., joined with Sens. Mike Enzi, R-Wyo. and Bill Nelson, D-Fla., to offer bipartisan legislation that would amend the Internal Revenue Code to make permanent a taxpayer’s election to deduct state and local general sales taxes in lieu of state and local income taxes.

The bill, S, 41, has been referred to the Senate Finance Committee, of which the three are all members.

The measure is designed to level the playing field for the eight states that do not have income taxes — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas and Washington.

“For nearly two decades, taxpayers in each of the eight states without an income tax were penalized because the federal tax code did not allow deductions for state and local sales taxes,” said a release issued by Cantwell’s office. “That disparity ended in 2004 when Congress successfully restored the deduction .... But the extension was never made permanent, requiring repeated approval by Congress.

In 2010, taxpayers across the Nation were able to reduce their taxable income by $17.9 billion with the sales tax deduction, the release said. More than $2 billion of this amount represented income reductions by taxpayers in Washington state, it said.

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