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Federal Internet Sales Tax Issue is Back in the News
08-02-2011, 09:56 AM

From National Jeweler:

Washington--Members of Congress have once again introduced a bill that would require online retailers to collect state sales tax, a bill that failed to pass in the previous session.

On Friday, U.S. Sen. Dick Durbin (D-Ill.) along with U.S. Reps. John Conyers (D-Mich.) and Peter Welch (D-Vt.) introduced the “Main Street Fairness Act,” the same name given to the Internet sales tax bill brought before Congress last year. Co-sponsors are Sens. Tim Johnson (D-S.D.) and Jack Reed (D-R.I.) and, in the House, Heath Shuler (D-N.C.).

“When a consumer can walk into a store, try out a product and then go home and buy it online without paying sales tax, Main Street businesses and downtowns lose,” Welch said. “Our bill will level the playing field and bring much-needed fairness, strengthen our Main Street businesses, create jobs and revitalize our downtowns.”

A number of organizations, including Jewelers of America, have supported passage of a federal law that would provide guidelines for the states on collecting sales tax from e-tailers. According to Durbin’s office, the bill also has the support of retailers including Sears Roebuck & Co. and Internet giant Inc.

In a letter to Durbin, Vice President for Global Public Policy Paul Misener said that the company supports a simple, nationwide system for collecting state and local taxes that is even-handedly applied to all sellers, regardless of their business model, location or amount of remote sales.

Under the 1992 Supreme Court ruling known as the Quill decision, retailers are only required to collect sales tax in states where they have brick-and-mortar stores. Consumers are supposed to report to the state and pay sales tax on anything they buy online, which doesn’t happen in the vast majority of cases.

Proponents of Internet sales tax laws say that this puts local retailers--including jewelers--at a disadvantage because must collect sales tax at the point-of-sale while online and catalog retailers, effectively, are charging less for the same product because they don’t have to collect state or local sales tax.

A total of 44 states and the District of Columbia responded to the Quill decision by adopting a comprehensive, interstate system to harmonize their sales tax rules called the Streamlined Sales and Use Tax Agreement (SSUTA). To date, 24 states have changed their laws to comply with the SSUTA but, according to the Quill decision, Congress has to authorize and sanction the SSUTA.

The new bill does just that and provides assistance for online retailers and small businesses to implement the requirements.

According to Durbin’s office, the legislation would provide states that choose to use it with the authority to require retailers to collect sales taxes already owed; require the SSUTA to meet a list of simplification requirements to ease administrative burdens for sellers; exempt small businesses from collecting sales taxes, with the governing board of the agreement determining what qualifies as a small business; compensate retailers for start-up costs associated with collecting sales taxes; release consumers from their existing sales tax remittance obligations and help states and localities collect billions in taxes that are already owed.

While the battle to level the playing field between online and brick-and-mortar retailers starts up again on the federal level, states continue to pass their own laws regarding online retailers and state sales tax.

In mid-July, Texas passed a law that requires any business with an outlet, office, location, warehouse, storage yard or manufacturing plant in the state that receives three or more orders in a calendar year to collect sales tax. The new law is set to take effect on Oct. 1.

Other states that have passed some form of an Internet sales tax law are: Arkansas, California, Colorado, Connecticut, Illinois, New York, North Carolina, Rhode Island and South Dakota.
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