Sens. Lamar Alexander, R-Tenn., Dick Durbin, D-Ill., and Mike Enzi, R-Wyo., are expected to introduce legislation on Wednesday that would close a loophole that now allows some Internet retailers to avoid collecting sales taxes from out-of-state customers.
The bipartisan Senate bill is similar, though not identical, to a measure introduced last month in the House by Reps. Steve Womack, R-Ark., and Jackie Speier, D-Calif., that would let states make online retailers collect sales taxes from out-of-state customers.
Both bills are targeted at closing a loophole left by a 1992 Supreme Court decision that exempted retailers from collecting sales taxes from customers in states where stores have no physical presence. While the ruling was directed at catalog stores, it has since been exploited by some online retailers as well.
The Senate bill would require that states meet certain standards to make it easier for retailers to collect sales taxes from out-of-state customers before they would be required to do so. The bill provides states with two ways to meet the bill's standards, according to a summary of the legislation obtained by Tech Daily Dose.
States could participate in a program known as the Streamlined Sales Tax project, which was formed by a group of states several years ago to simplify their sales tax codes. Alternatively, they could meet standards set by the bill including designating a single state agency where retailers can send the taxes, providing a uniform sales and use tax base within a state and protecting retailers from liability for mistakes they may make in collecting taxes on remote sales.
The Senate bill has a more limited small business exemption, exempting retailers with annual gross receipts of $500,000 or less from the bill's requirements.
Firms such as from eBay have voiced concern about the bill's impact on small online retailers, many of which use eBay to help sell their products online, and have called for a much bigger exemption for small businesses.
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