U.S. Senator Dick Durbin of Illinois is currently prepping legislation that would implement a state sales tax for Internet e-commerce.
"Why should out-of-state companies that sell their products online have an unfair advantage over Main Street bricks-and-mortar businesses?" Durbin asked rhetorically during a speech in Collinsville, Illionois.
"Out-of-state companies that aren't paying their fair share of taxes are sticking Illinois residents and businesses with the tab."
Currently, Americans who shop from out-of-state aren’t always required to pay sales taxes at checkout.
For example, if a Californian buys a camera from Manhattan’s B&H Photo, he or she won’t pay the same sales tax as a local mall.
Durbin says this gives e-commerce storefronts an "unfair advantage" over brick and mortar shops.
On the other hand, the U.S. maintains approximately 7,500 different tax jurisdictions, each with very precise (and challenging) rules.
The pro-tax forces within the House are offering what’s called the Streamlined Sales Tax Agreement, which aims to simplify current laws. 24 states have thus signed on to support the law either wholly or partially, which may ease concerns about complexity and make it easier for Congress to implement the law.
The Internet tax bill will be called the Main Street Fairness Act, which follows legislation introduced last July under the same name. Durbin is up against some opposition, though.
One of the main opponents to the proposed legislation is the Direct Marketing Association, an organization which sued Colorado last year to block a state tax law from taking effect.
"You're just giving the states a blank check to make changes without any congressional oversight," says Jerry Cerasale, the DMA's senior vice president for government affairs. "We oppose that...We think that's abrogating the authority of Congress."
Paul Misener, vice president of public policy for Amazon said the e-tailer wouldn’t be entirely opposed to an Internet tax, stating, "We've long supported a truly simple, nationwide sales tax system, evenhandedly applied."
Currently, the law asks e-retailers to pay their own state’s sales tax rate, called a "use tax," at tax time. However, the law is not fully enforced so few actually pay up.
"Big box stores love to mobilize smaller booksellers to complain about competing with Amazon," says Steve DelBianco, executive director of the NetChoice coalition, which counts eBay, Overstock.com, and Yahoo as members. "The irony is that those small booksellers have been clobbered by big box stores. The Internet's their friend."