By Marc Heller


The Senate could see its first vote on sales taxes for goods sold over the internet as soon as the week of Dec. 3, after Sen. Richard L. Durbin (D-Ill.) proposed to address the issue through an annual bill covering military programs.


Durbin and Sen. Michael B. Enzi (R-Wyo.) proposed Nov. 29 to attach their Marketplace Fairness Act (S. 1832) to the annual defense authorization bill being considered in the Senate. The Senate has been debating the bill and is scheduled to continue consideration the week of Dec. 3.


The senators’ proposal would allow states to begin compelling remote sellers to collect sales tax from residents of those states, although businesses with annual sales of less than $500,000 would be exempt.


Timeline Murky


There was no word when the Senate might consider the provision, or even if it will be accepted for consideration on a nonrelated bill. Durbin filed it with the Senate Nov. 29 but had not formally offered it on the floor as of Nov. 30.


Durbin is the Senate’s second-ranking Democrat, and Senate Majority Leader Harry Reid (D-Nev.) has spoken favorably of the measure. Durbin has said he believes he can attract the 60 votes necessary to overcome a filibuster.


Dozens of amendments have been proposed to the defense bill. Without an agreement in place on amendments to be offered, Reid filed for cloture Nov. 30; that would force a procedural vote on Dec. 3 to limit debate, at which point nonrelated amendments will be limited.


Level Playing Field, Proponents Say


Proponents of enhanced sales tax collection authority for the states hailed the measure’s introduction, while a key critic said it fails to simplify the complex sales tax regulations in various states—potentially leading to errors in collection.


“This amendment will bring a level playing field for local and online retailers alike and provide a business climate in which retailers have a better opportunity to grow and create jobs in a truly competitive marketplace,” said David French, senior vice president for government relations at the National Retail Federation, in a letter to senators.


French said the current system, in which sales taxes are typically collected by “brick and mortar” stores but not by online sellers, creates an unfair advantage for internet-based sellers.


But eBay Inc. attacked the measure in a news release, suggesting it could spoil the sort of success online retailers have enjoyed this holiday season.


“Small businesses are having greater success than ever this holiday shopping season using Internet and mobile technology to serve customers and create economic opportunity,” said eBay’s senior director of government relations, Brian Bieron. “Congress should reject Internet sales tax schemes like the Durbin-Enzi amendment that would throw a new tax barrier in front of those small businesses and their Internet success.”


Copies Marketplace Bill


The proposal mirrors the Marketplace Fairness Act (S. 1832), one of four bills proposed in Congress to deal with the sales tax issue. It includes an exemption for businesses with less than $500,000 in annual sales and liability protections for businesses that make errors in sales tax collection under certain conditions, as well as a requirement that states provide sales tax software to help ensure proper calculation of the tax.


States would not have to become members of the Streamlined Sales Tax Governing Board; nonmembers would have to meet certain minimum tax simplification rules.


The loophole on joining the streamlined sales tax agreement is a key flaw in the bill, according to the NetChoice Coalition, a group of online businesses critical of the legislation. Allowing states to not join the streamlined group could undermine the effort to simplify and harmonize sales tax codes across the country, NetChoice has said.


NetChoice’s executive director, Steve DelBianco, told BNA in an email Nov. 30 that the bill is “so weak on simplification that it could never stand the scrutiny of a standalone hearing or markup.”


The National Governors Association has made the e-commerce sales tax legislation its top priority for the remainder of 2012. States could lose out on as much as $23 billion in revenue from uncollected sales tax, the NGA has reported.


Lobbyists pushing for the measure told BNA in recent weeks that the remainder of the 2012 congressional session provides their best opportunity to pass the bill, rather than awaiting the uncertainty of a new Congress in the new year.



Reproduced with permission from Daily Tax Report,  231 DTR G-6 (Dec. 3, 2012). Copyright 2012


by The Bureau of National Affairs, Inc (800-372-1033) <>