U.S. founding father Benjamin Franklin once
wrote, "In this world nothing can be said to be certain, except death and
Thus it is perhaps not surprising that as U.S. Tax Day rolls around, Congress is
considering yet another effort to try to impose sales taxes
on the internet. An aid to Senator Dick Durbin (D-Illinois) told CNET that
the Senator would introduce a bill looking to implement an online sales tax
after the Easter recess.
Sen. Durbin has been trying to push the issue for some time. In a speech
in Collinsville, Ill. in February he complained, "Why should out-of-state companies
that sell their products online have an unfair advantage over Main Street
bricks-and-mortar businesses? Out-of-state companies that aren't paying their
fair share of taxes are sticking Illinois residents and businesses with the
Currently online retailers like eBay Inc. (EBAY)
and Amazon.com, Inc. (AMZN)
collect no sales tax in most states. That is because of a federal legal
precedent called nexus, which states that companies only have to collect taxes
in states they have physical presences in. That concept was solidified by
the 1992 case called Quill v. North Dakota, in which the U.S. Supreme
Court ruled: "Congress is now free to decide whether, when, and to what
extent the states may burden interstate mail order concerns with a duty to
collect use taxes."
Formally, in most states people are expected to report these unpaid taxes at
the year's end and pay them personally, but almost none do.
The decision to push taxes could hurt these major e-tailers. But it could
hurt small e-tailers like ThinkGeek even more;
as they would need major infrastructure overhauls to support the collection of
taxes. There are over 7,500 taxing jurisdiction in the U.S., each with
their own tax rules. Navigating that mess would be a nightmare for these
The new bill will be entitled "The Main Street Fairness Act".
According to his aides Sen. Mike Enzi(R-Wyoming)
will co-sponsor the bill. He sponsored a previous bill with
the aim of internet taxation.
In an effort to push for online taxes Sen. Durbin and other proponents may back
a broad adoption of the Streamlined Sales Tax Agreement an
inter-state proposal that 24 states have thus far adopted. Formulated in
2002, the proposal seeks to do away with specialized, confusing tax laws and
adopt a simpler sales tax code.
Retailers like Target Corp. (TGT)
and Wal-Mart Stores, Inc. (WMT)
would be deeply grateful if the bill passed. They've been pouring
millions into lobbying Congress to eliminate the online tax exemptions.
they're trying to convince small retailers to support them. Some say that
doing so may not be in those small players' best interests, though.
Argues Steve DelBianco, executive director of the NetChoice coalition,
a group which represents eBay, Amazon.com, and other e-tailers, "Big box
stores love to mobilize smaller booksellers to complain about competing with
Amazon. The irony is that those small booksellers have been clobbered by
big box stores. The Internet's their friend."
Despite the bi-partisan sponsorship and fair degree of bipartisan support the
measure is expected to have difficulty passing in the Republican-controlled
house. Many Republicans vote against high profile taxes increases as a
rule and many Democrats may be wary of supporting the measure as the 2012
elections loom near.
Last time around, for all the retailers lobbying
efforts, the e-tailers (who also lobbied pretty heavily) won. The
internet is tax free -- for now.