Sales tax Debate Continues

With state budgets in red, push for online tax gains steam

McClatchy NewspapersDecember 23, 2012 

DeMint in the Spotlight

FILE - In this Feb. 4, 2010 file photo, Sen. Jim DeMint, R-S.C. speaks during a news conference on Capitol Hill in Washington, to discuss the introduction of legislation to enact a one-year earmark moratorium and a Balanced Budget Constitutional Amendment. Over the past year, DeMint has morphed from a relatively unknown Southern Republican into a national champion of conservative activists. (AP Photo/Lauren Victoria Burke, File)


— At The Regulator Bookshop in Durham, N.C., co-owner Tom Campbell says he is losing business as customers come in to photograph his books or jot down notes, conducting their research before they buy the books online to avoid a sales tax.

He says Congress could end the practice by giving states the option of forcing online retailers to collect sales taxes from their customers.

Of the online retailers, Campbell said: Our customers pay the sales tax that goes toward maintaining the roads that their delivery trucks drive on. And if that’s not a free ride, I don’t know what is.”

The argument has picked up steam on Capitol Hill and in statehouses across the nation, with governors eyeing an online sales tax as a way to help cash-strapped states raise billions of dollars.

Backers say it would help equalize competition among all retailers, particularly as online sellers become bigger players in world trade. But critics say it would be wrong to let states impose yet another tax on savvy consumers who have found an easy and popular way to save a few bucks.

In a letter to congressional leaders last week, the bipartisan National Governors Association said collecting the tax would bring $23 billion in new revenue to the states, serving as a stimulus to grow the economy.

Washington Democratic Gov. Chris Gregoire, a leading advocate, said the plan would raise $934 million for her state alone by 2017, based on an estimate from the state’s Department of Revenue.

She said supporters have growing momentum on their side, noting online retailing giant Amazon has lined up behind the idea. And she called it “our single best opportunity to bring this fairness issue to a close.”

“I’m not down on the Internet — I shop on the Internet myself, but I want fairness,” Gregoire said. And if Congress does not allow states to collect the tax, she said, “it’s going to continue to erode the ability of the brick-and-mortar businesses in our state to stay in business.”

In the letter, signed by Gregoire and Republican Gov. Bill Haslam of Tennessee, the governors noted online sales during the 2012 holiday season are up by 14 percent over last year and that sales on “Cyber Monday” this year — the Monday after Thanksgiving, the online equivalent of “Black Friday” — hit $1.47 billion, a record high. And they complained Congress is giving online sellers “an unwarranted yet growing subsidy” by letting them escape the sales tax.

The issue has a long history.

In 1992, the Supreme Court ruled retailers don’t have to collect sales taxes for out-of-state shipments if they don’t have a physical presence in the state.

But the high court left the door open for Congress to establish new rules.

But there’s plenty of opposition.

At the hearing of the Senate Commerce, Science and Transportation Committee in August, outgoing U.S. Sen. Jim DeMint of Greenville said retailers use different business models with different cost structures and Congress shouldn’t take “an unprecedented action” to make them uniform.

“We’ve got a precedent that we’re establishing here that’s going to open a door that I think all of us are going to regret,” said the S.C. Republican.

Another opponent, U.S. Sen. Kelly Ayotte, R-N.H., said the legislation would penalize her home state, one of only five that currently has no sales tax.

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