WASHINGTON — State and local groups overwhelmingly praised the Senate passage of the online sales tax bill late Monday night but it still remains uncertain whether it can clear the House, where Republicans view it as a new tax.
The Senate voted 69 to 27 on the Marketplace Fairness Act, S. 743, which would enable states to collect sales taxes from Internet purchases. The bill would require out-of-state retailers to collect sales taxes when online goods are sold. Currently only retailers who have a physical presence in a state can collect sales taxes and supporters of the bill claim they have a disadvantage to online businesses.
Philadelphia Mayor Michael Nutter and president of the U.S. Conference of Mayors applauded the Senate's work on the bill calling it a "win for local governments and businesses everywhere."
"This legislation will finally level the playing field by requiring all merchants, whether they sell over the counter on Main Street or over the Internet, to collect the same taxes," Nutter said in a statement. "With federal funds to local governments dwindling and few other sources available to municipal leaders for raising revenue, this measure will provide a badly needed funding stream so we can better serve our residents — from fixing crumbling roads and bridges to funding schools and first responders to maintaining and upgrading water systems."
The National Conference of State Legislatures estimated that states lost approximately $23 billion of revenue in 2012 as a result of not being able to collect sales tax revenue on remote sales.
Critics of the legislation, including the Securities Industry and Financial Markets Association, the conservative leaning Heritage Foundation and Americans for Tax Reform, claim it is a tax increase and will add additional burdens for small businesses who have to comply to the new rules. SIFMA has said that the bill could lead to unexpected costs passed on to consumers of financial services.
The National League of Cities and other supporters emphasized that the measure is not a new tax nor does it increase any existing tax, but rather it provides for the enforcement of state and local governments' authority and levels the playing field between Main Street and online retailers. President Barack Obama has said he supports the bill.
The bill now must be considered by the House, where a bipartisan group of 66 representatives have already signed on as cosponsors of the legislations. However, House Judiciary Committee chairman Rep. Bob Goodlatte, R-Va., who has jurisdiction over the bill, has expressed skepticism about the measure.
"The NLC calls on House Judiciary Chairman Bob Goodlatte, R-Va., whose Committee has jurisdiction, to hold a hearing on this important legislation in short order," said Clarence Anthony, executive director with the NLC, in a statement. "I also ask every city official to reach out to their House members to ask them to support the Marketplace Fairness Act."
Rep. Steve Womack, R-Ark. is one of the lead cosponsors of H.R. 684, the House version of the online sales tax bill. He urged House members to quickly pass the bill to "finally level the playing field for American businesses."
"After twenty years, there is finally light at the end of the tunnel for our brick-and-mortar businesses, and today's bipartisan Senate vote to pass the Marketplace Fairness Act has given even more momentum to close this tax loophole once and for all," Womack said in a statement. "Now, it's up to the House to act, and I will continue to work with my colleagues to make sure we do so before it's too late."
