Washington Secrets

Internet tax gains steam with GOP support

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Politics,Paul Bedard,Washington Secrets

Legislation clearing the way for states to collect sales tax on consumer internet sales -- long off limits -- is picking up steam with the support of Republicans in the Senate and conservative governors.

On Thursday, Wyoming Republican Sen. Michael Enzi and Tennessee's Lamar Alexander are joining Illinois Democratic Sen. Dick Durbin to unveil the "Marketplace Fairness Act" which would let states compel online and catalog merchants, no matter where they're located, to collect sales tax.

Their move follows demands from Republicans governors, struggling to balance budgets, that Washington end the practice of letting online retailers ignore collecting the tax which is required in most states--but not enforced.

Court rulings in the past have let online retailers off the hook, reasoning that it would be a burden to collect taxes for 50 different states. And states that require taxpayers to pay the taxes have largely ignored their own laws.

But technology makes collecting the taxes easy today. That, plus the need for new revenue by states that don't want to raise income or real estate taxes, is pushing the legislation forward.

So-called "brick-and-mortar" retailers already collect sales tax and say online retailers have an unfair advantage. The bill is expected to exempt online merchants with $1 million in annual sales or less.

Many conservatives are also now endorsing the idea. Al Cardenas, chairman of the American Conservative Union, "A robust free-market system requires a level playing field, where the government doesn't get to pick winners and losers in the marketplace." He added: "The number one threat to the future of American competitiveness isn't other countries-- it's our tax law. When it comes to state sales taxes, it is time to address the area where federally mandated prejudice is most egregious -- the policy towards Internet sales, the decades-old inequity between online sales and in-person sales as outdated and unfair."

But anti-tax groups are committed to fighting the legislation. In a statement to Secrets, Americans for Tax Reform spokesman John Kartch said, "Americans for Tax Reform is opposed to the Marketplace Fairness Act because this bill subjects businesses to out of state revenue departments and courts, places upward pressure on the sales tax, and grants states new tax collection authority without removing equivalent taxing authority elsewhere. As such, this legislation can only be viewed as a tax increase."

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