A bipartisan “Sense of the Senate” Resolution has been introduced
in an attempt to counteract efforts within the United States Congress, and by
some states, to impose sales taxes on out-of-state online retailers.
Currently, under a US Supreme Court ruling, known as the ‘Quill’
decision, retailers are only required to collect sales tax in states where they
also have brick-and-mortar stores. The burden falls to consumers, who are required
to report to state tax departments any sales taxes they owe for online purchases
on their tax returns.
As a result, local retailers are looked at as having a competitive disadvantage
because they must collect sales taxes at the point of sale, while out of state
retailers, including many large online and catalogue retailers, give their customers
an effective discount by collecting no state or local sales taxes.
A number of states have responded to the Quill decision by working
with local governments and the business community to adopt a comprehensive interstate
system to harmonize and simplify their sales tax rules and administrative requirements,
called the Streamlined Sales and Use Tax Agreement.
However, the Quill decision also made it clear that Congress would need to
authorize and sanction any such agreement, and a proposed bill, the Main Street
Fairness Act, was introduced, in July this year, in both the Senate and the
House of Representatives to provide that support.
“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 - Illinois), who introduced the bill. “In 2012,
states across the country are expected to lose as much as USD24bn in uncollected
state and local taxes on internet and catalogue sales.
Other interested parties are not so sure, and Ron Wyden (D - Oregon), Kelly
Ayotte (R- New Hampshire) and other bipartisan Senators have now introduced
a “Sense of the Senate” Resolution stating that Congress will not
enact legislation that “would upset the free and fair internet marketplace
and allow state governments to impose new and onerous and burdensome sales tax-collecting
schemes on out-of-State, internet-enabled small businesses. This, they added, would "adversely impact
hundreds of thousands of jobs, reduce consumer choice and impede the growth
and development of interstate commerce”.
“Whenever there is an opportunity to invent new ways to tax goods and
services, governments will take advantage of them,” Wyden said. “But
allowing a scenario in which a small online retailer is forced to calculate,
collect and remit thousands of different taxes for thousands of different tax
jurisdictions is a barrier to entry that will discourage entrepreneurship.”
“Small online storefronts are taxed differently than big-box brick and
mortar operations because they are different,” he added. “We are
offering this resolution to reaffirm those differences and to ensure that Congress
doesn’t enact legislation that will discourage entrepreneurs from using
the Internet to grow their companies and our economy.”
In the opinion of Ayotte, a member of the Senate Small Business Committee,
“Congress should not impose onerous tax collection and remittance requirements
on small Internet vendors. Placing new requirements on these companies would
mark a significant departure from the traditional hands-off approach that Congress
has taken with respect to the internet marketplace.”
The Computer & Communications Industry Association has also applauded the
introduction of the Resolution. Its President and CEO, Ed Black, stated that
“it is counterproductive to add to the administrative burdens of small
businesses at the very moment we need them growing and leading our economic
recovery. E-commerce is an innovation that has enabled businesses to broaden
their scope beyond traditional geographical limitations.”
He concluded that “allowing states to impose geographically-based taxation
collection requirements on e-commerce businesses would re-impose the very limitations
that innovation has enabled them to overcome,” and described such moves
as “retrogressive measures that would draft online vendors into service
as remote sales tax collectors”.
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