Senate passes Internet sales tax bill; House fate uncertain

WASHINGTON -- The Senate voted 69-27 Monday to approve legislation that would allow states to force larger online retailers to collect sales taxes.

But the bill faces an uncertain future in the House as lawmakers, particularly Republicans, wrestle with whether the Marketplace Fairness Act amounts to a tax increase.

The Market Place Fairness Act would give states the authority to force larger retailers to collect sales taxes that residents already are obligated to pay. But with most consumers dodging those taxes for years, the result will be that people will pay more in taxes.

For influential activist Grover Norquist of Americans for Tax Reform, which asks lawmakers to sign a no-new-tax pledge, the so-called Marketplace Fairness Act is, in effect, a tax increase.


And his group, along with some other conservative activists, is pushing House members to reject it.

Quiz: How much do you know about Internet sales taxes?

But some Republicans have pushed back, saying the bill raises no new taxes and just helps level the playing field between online and traditional bricks-and-mortar retailers.

Two of the leading Senate supporters were Repubilcans -- Mike Enzi of Wyoming and Lamar Alexander of Tennesssee. And the bill passed the Senate with strong bipartisan support.


Rep. Steve Womack (R-Ark.) is the main House sponsor and is hopeful the chamber will pass the bill.

But House leaders have not committed to taking up the legislation, saying it would first go to the House Judiciary Committee.

The legislation would override a 1992 Supreme Court decision that prevented states from collecting sales taxes from companies with no in-state presence.

In recent years, California and other states have stepped up their efforts to collect sales taxes for online purchases by their residents.

In 2011, California enacted a law expanding the definition of an in-state presence so it could begin collecting sales tax from some large online retailers, notably Inc. Amazon initially fought such efforts but then agreed to start collecting sales taxes and now supports the legislation.

EBay Inc. has remained strongly opposed, and its chief executive, John Donahoe, has been trying to rally the company’s 40 million users to urge their representatives to oppose it unless there are major changes.

The Senate bill would allow states to expand their sales tax collection to companies with no in-state presence, unless they have less than $1 million annually in out-of-state online and other remote sales.

Sen. Dick Durbin (D-Ill.), a chief Senate sponsor, said the legislation would help struggling state and local governments and would exempt 99% of small businesses.


EBay wants the exemption for small businesses increased to those with up to $10 million in annual sales or to those with fewer than 50 employees to avoid hurting the growth of small businesses on the Internet.


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