WASHINGTON -- A measure to allow state and local governments to collect sales taxes from online purchases received key support in the United States Senate Friday, with 75 senators voting to include a version of the legislation in the budget resolution.
State government leaders have been pushing for the authority to collect taxes on residents' online purchases, saying it is costing billions annually. A 1992 U.S. Supreme Court decision gave states the ability to collect the taxes from catalog and online purchases, but only if residents voluntarily send the tax payments to state collectors. The Marketplace Fairness Act allows businesses to collect the taxes on online purchases and send them to the state where the buyer resides.
While the Senate voted to include the legislation in the budget resolution, the action is largely a ceremonial show of support for the measure; the bill would need to advance through the legislative process separately from the budget.
“Today’s vote proves that an overwhelming majority of Senators support this bipartisan legislation to level the playing field for brick-and-mortar retailers,” Senate Majority Whip Dick Durbin (D-Ill.) said in a statement. “The Marketplace Fairness Act is a bill whose time has come in Congress and one that is long overdue for states, local governments and small businesses.”
Senate Finance Committee Chairman Max Baucus (D-Mont.) said on the floor Thursday afternoon that the legislation would impact small businesses collecting the taxes, a message echoed by Sen. Kelly Ayotte (R-N.H.). Baucus is urging that the bill be routed to his committee for consideration.
Supporters of the bill -- including Amazon, Walmart, the National Governors Association and the National Conference of State Legislatures -- have described it as protecting downtown retail businesses. They said people use retail businesses as showrooms, then shop online to avoid taxes. The NCSL, which sponsored a lobby day for the bill in December, estimated that collectively states lost $23.3 billion in tax revenue last year from online purchases.
Opponents have painted the bill as one that would kill online small businesses by turning them into tax collectors and requiring them to calculate the sales tax for state and local governments. The legislation would exempt businesses with less than $1 million from online sales, but opponents say that won't help.
"Senators need to understand that $1 million in sales translates to less than $100,000 in business income -- enough to support only a few employees," Phil Bond, the executive director of We R Here, a group opposed to the legislation, said in a statement. "Indeed, this legislation seems designed to help big retailers like Amazon.com and Walmart eliminate their much smaller competition."