It’s been nine years since Congress first took up online shopping’s unfair sales tax advantage over brick-and-mortar retailers. But Virginia’s Bob Goodlatte, the Republican chair of the House Judiciary Committee, says more debate is needed before Congress can set rules for states to collect sales tax on Internet purchases.
Say what? Nine years isn’t enough to deal with what in 2005 we called the most widespread form of tax evasion in America?
And we thought the Senate was supposed to be the deliberative body.
But the Senate in 2013 passed bipartisan legislation setting uniform rules for collecting the tax to put online markets on a level playing field with Main Street stores. The House needs to pass this legislation before it leaves for its five-week summer recess at the end of July.
Last week the Senate tried to pair the bill with legislation to keep access to the Internet itself tax free, hoping that would improve its chances in the House. But House Republicans still resist it.
This is not a partisan issue. Beyond the GOP support in the Senate, at least 12 Republican governors, including New Jersey’s Chris Christie, support national standards for collecting sales taxes online.
Twelve states already collect the tax. California, for example, added $250 million to its revenues in the past year, allowing the state to start a preschool program and increase reserves. All told, state governments estimate they lose $23 billion a year by not collecting online sales taxes.
This is not a new tax. All along, consumers have been legally obligated to calculate the tax on their online purchases and send it to the tax collector. But this is all but impossible to enforce, and voluntary compliance — let’s just say it’s minimal. Direct collection, like stores, is the only way.
The Senate bill passed after Walmart and Amazon got on board. They realized that a standardized, federal system was better than trying to deal with different laws passed by individual states.
The legislation protects small online business owners by setting a threshold of more than $1 million in Internet sales to collect the tax.
Online retail giants such as eBay remain opposed, hoping to maintain their nearly 10 percent advantage over Main Street competitors. eBay expects revenues in the $18 billion range this year, so somehow we suspect it would survive if it were held to the same standard as physical stores — which, by the way, serve an important public purpose by allowing shoppers to see and touch merchandise. It costs money to maintain stores. But because of the tax advantage, people often pick what they want at the mall and then order it online.
Politicians of all stripes say taxes need to be fair for all. National standards for an online sales tax shouldn’t have taken nine years and definitely don’t need more study.