Obama Supports Online Sales Tax Bill, SIFMA Opposes it

The Obama administration released a policy statement on Monday afternoon strongly supporting the online sales tax bill just two hours before a planned Senate cloture vote on whether to limit debate on the measure.

“The administration strongly supports provisions in S.743 that would directly address those concerns by granting only those states and localities that have simplified their sales tax systems the option to require all retailers, including those located out-of-state, to collect sales and use taxes already owed under law,” the Office of Management and Budget said in a Statement of Administration Policy. “The administration also is pleased that S.743 provides an exception for small online businesses and requires states to make available, at no cost to retailers, software that helps calculate the state sales tax on remote transactions, as well as administrative services.”

The administration looks forward to working with Congress to support state and local priorities and “promote a level playing field for local retailers,” the administration said.

At least three fifths of the full Senate — typically 60 members — must vote for cloture to limit debate on the online sales tax bill in order to proceed to a vote on the bill.

Ahead of the vote, a handful of state and local groups and market participants published statements of either support or opposition to the bill, officially known as the Marketplace Fairness Act.

The bill would allow states to collect taxes from online retailers and catalogs. For years brick-and-mortar businesses have complained they are at a disadvantage because they have to collect taxes while online retailers who don’t have a physical presence in a state are exempt.

States would be required to simplify their sales tax administration. The measure also includes an exemption for remote sellers who make less than $1 million a year.

Failure to collect taxes on remote sales in 2012 resulted in forgone state tax revenues totaling more than $23 billion, according to the National Conference of State Legislatures.

The bill was initially introduced in February and then re-introduced by Sen. Mike Enzi, R-Wyo., last week. It has 28 cosponsors. Senate Majority Leader Harry Reid, D-Nev., filed a motion to move the bill to the full Senate for a vote late last week to circumvent the Senate Finance Committee. The committee’s chairman, Sen. Max Baucus, D-Mont., who is from a state with no sales tax and opposes the bill, has refused to bring the measure before the committee for a vote, insisting it be considered in a comprehensive tax reform package.

The bill was approved as a nonbinding measure to the Senate’s fiscal 2014 budget with 75 members voting in favor of it. Supporters point to that vote as a bellweather of the final outcome for the bill.

“This overwhelming, bipartisan vote stands in stark contrast to those who oppose this common-sense legislation,” the National Governors Association wrote in a letter to Senate leaders. “Never before has the need for legislation to grant states the authority to collect sales taxes on remote sales been greater. The continued disparity between online retailers and Main Street businesses is shuttering stores and undermining state budgets.”

The NGA letter was signed by Pennsylvania Republican Gov. Tom Corbett and Kentucky Democratic Gov. Steven Beshear.

Those who oppose the measure also have made their positions very clear. The Securities Industry and Financial Markets Association and the Financial Services Roundtable each said the Senate is moving too quickly on The Marketplace Fairness Act and is not adequately exploring the bill.

“The bill could lead to unexpected costs being passed on to consumers of financial services, including sales taxes on services or state-level stock transaction taxes,” SIFMA said in a release. “We urge Congress to hold hearings on the impact of this legislation on the national market for trade in services, including financial services, before moving forward.”

eBay Inc. chief executive officer John Donahoe sent a letter to Congress urging members to vote “no” on the measure, which he said would create “new sales taxes and burdens for small online businesses.”

Donahoe also said that “imposing unnecessary tax burdens on small online businesses is a bad idea” and could potentially put them out of business.

The NGA disputed claims by opponents that the legislation is a new tax. Instead, the group said it is “not a new tax, nor is it a tax on the internet or on business .... It is merely a means of collecting taxes owed on the sale of goods and services over the internet.”

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