Legislation that would authorize states to require online retailers to collect sales taxes from out–of-state customers appears to have found new life in the Senate.
Sens. Lamar Alexander, R-Tenn., Michael Enzi, R-Wyo., and Senate Majority Whip Dick Durbin, D-Ill., are working on legislation that is similar, though not identical, to a measure introduced in the House two weeks ago by Reps. Steve Womack, R-Ark., and Jackie Speier, D-Calif. The Womack-Speier bill would require states to simplify the process for out-of-state retailers, including providing a single sales-tax rate, designating a single source for remitting sales taxes from out-of-state sales, and establishing uniform rules for what sales are taxable.
One key difference at this point between the proposed Senate measure and the House bill would be that the Womack-Speier legislation includes a higher small-business exemption, according to a source familiar with the issue.
“Sen. Alexander is working with other senators on legislation to address what he sees as a states’ rights issue: preserving the right of states to collect—or decide not to collect—taxes that are already owed under state law,” an Alexander spokesman told National Journal via e-mail, though he did not provide details on the bill. The measure may be introduced as soon as next week.
The legislation aims to close a loophole left by the Supreme Court’s 1992 Quill v. North Dakota decision that found catalogue retailers do not have to collect sales taxes from customers in states where those companies don’t have a physical presence.
The decision has since been extended to Internet sales. Online retailers such as Amazon have exploited this tax advantage to offer some of their customers products at lower prices than their brick-and-mortar counterparts. Amazon in particular has been aggressive in fighting efforts to require online retailers to collect sales taxes from out-of-state retailers but recently bowed to California on the issue.
Earlier this year, Durbin introduced a different bill also aimed at requiring online retailers to collect sales taxes from customers in states where they have no physical presence. Durbin’s bill focused on an approach included in older bills that would let states require the out-of-state collections if they have signed on to the Streamlined Sales Tax project.
That approach has attracted little support in Congress. Given this, the new Senate bill aims to offer states an alternative way to simplify their tax code to make it easier for retailers to collect taxes on out-of-state sales while still allowing the Streamlined Sales Tax project to work.
Groups that represent major brick-and-mortar retailers hope this latest legislation will have more of a chance of moving through Congress than previous bills.
“We are confident that these new approaches are what’s needed to break the decade-long logjam on this issue,” said Katherine Lugar, executive vice president for the Retail Industry Leaders Association, which represents big-box retailers like Best Buy, Target, and Wal-Mart.