In late June, Internet retailer Amazon terminated nearly 25,000 contracts with their California online affiliates in direct response to online tax legislation by Gov. Jerry Brown. The bill, which went into effect immediately, forced online retailers to collect a base 7.5 percent state sales tax on any item purchased or funneled through a California resident. Now, three members of the U.S. Congress are wading into the dispute by creating a nationwide bill that would require online retailers to add sales taxes to customers' bills, just as brick-and-mortar stores do.
“Consumers shouldn’t have to face the burden of reporting all of their online purchases. Main Street retailers collect sales taxes on behalf of consumers. Why shouldn’t online retailers do the same?” said Senator Dick Durbin (D-Ill.), who is introducing the bill along with Representatives John Conyers (D-Mich.) and Peter Welch (D-Vt.).
Because proponents of the bill stated that it would level the playing field, Amazon has given it the stamp of approval.
Durbin noted that in 2012 states across the country are expected to lose as much as $24 billion in uncollected state and local taxes on Internet and catalog sales. From 2005 to 2010, the state of Illinois estimated that it lost $153 million each year due to the lack of sales tax on online retailers.
“The Main Street Fairness Act doesn’t ask anyone to pay a single penny more in taxes,” Durbin said. “Instead, it would help governors and mayors collect taxes that are already owed.”
Amazon has boycotted state-specific online tax legislation, including the recent California decision, because it made it difficult to report and collect the taxes.
“This bill will level the playing field for local businesses by ensuring that online retailers collect the same sales taxes that brick-and-mortar retailers already do,” said Conyers.
In a letter to Durbin, Amazon.com’s Paul Misener, vice president for global public policy, said, “Amazon.com has long supported a simple nationwide system of state and local sales tax collection, evenhandedly applied to all sellers, no matter their business model, location or level of remote sales. To this end, I am writing to thank you for your bill that would allow states that sufficiently simplify their rules to require the collection of sales tax by out-of-state sellers.”
In addition to Amazon backing the bill, brick-and-motor chain Sears also supports the proposed legislation.
“[Sears Holdings] believes it will restore balance and fairness to the system by enabling states to enforce the collection of taxes that are already owed by every customer making a purchase, whether the purchase is online or in a retail store,” said William Harker, senior VP of Sears Holdings Corporation. “This is a critical step in addressing an issue that has resulted in over a decade of unfair competition between retailers who collect the sales tax and those who refuse to do so.”
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