The Senate chose sides in a battle that pits big online-only sellers against bricks-and-mortar retailers and state revenue departments.
Washington – The U.S. Senate on Friday backed increased sales tax collections on online purchases.
Congress’ upper chamber decided on a 75-24 vote to add the so-called Marketplace Fairness Act as an amendment to the federal budget bill that reflects a “sense of the Senate.”
While another vote will be required to move the bill toward implementation, the symbolism of Friday’s vote loomed large in a fierce battle that pits Internet sellers led by eBay and antitax groups against cash-starved state governments and retailers such as Minnesota-based Best Buy Co. Inc. and Target Corp.
Minnesota’s Democratic senators, Amy Klobuchar and Al Franken, sided with the retailers and state governments. Klobuchar co-sponsored the Marketplace Fairness Act, calling it a matter of equity that protected Minnesota jobs and services.
The measure makes it easier for states to collect revenue from purchases state residents make from out-of-state Internet, catalog or mail-order vendors.
“I think more and more states have seen the effect of this,” Klobuchar said. “At first it was only hurting big stores like Target and Best Buy.”
Now, she said, it’s hurting mom-and-pop stores.
State officials estimate that they are losing $400 million a year in sales tax revenue on Minnesotans’ out-of-state Internet, catalog and mail order purchases. Collectively, the 45 states that impose a sales tax are losing an estimated $23 billion per year, according to the Streamlined Sales Tax Governing Board, a group formed to assist states in collecting sales taxes.
Traditional retailers say the ability of online-only vendors to sell items tax-free gives them an unfair advantage over bricks-and-mortar retailers.
Best Buy’s chief lobbyist, Laura Bishop, flew to Washington on Wednesday to meet with Senate staffers to reiterate support for the bill in anticiaption of Friday’s vote.
Bishop, who has worked to increase online sales tax receipts for a decade, said the Senate’s bipartisan decision on Friday would be “a strong signal it will pass in the Senate” sometime this year.
“This is a definite moment of seeing people come together,” Bishop said in an interview.
Like Best Buy, Target has sent representatives to meet with “various legislators to share our position,” the company said in a statement.
“The rapid growth in online retail has uncovered an unfair pricing advantage in existing sales tax laws that benefits online-only retailers,” the statement said. “Target strongly supports state and federal legislative efforts to close this anti-competitive loophole and level the playing field for all retailers.”
Brian Bieron, eBay Inc.’s senior director of global public policy, countered that forcing Web vendors to collect sales taxes for states where they don’t live amounts to taxation without representation. Bieron believes imposing new sales tax collection rules will squelch competition and increase prices for consumers.
“At the end of the day it looks like a tax increase,” Bieron said.
Indeed, Sen. Kelly Ayotte, R-N.H., said the Marketplace Fairness Act “infringes on the rights of businesses in my state working over the Internet.” Ayotte called the bill the “Internet Tax Collection Act.”
The act lets states collect sales tax from businesses that do not have a physical presence in a state but that do business with state residents. The bill exempts firms with less than $1 million in out-of-state sales.
Jim Spencer • 612-673-4503