Online sales tax sails through U.S. Senate

WASHINGTON – The U.S. Senate on Monday overwhelmingly approved a bill that lets states require online merchants to collect sales taxes on out-of-state purchases made by their residents.

The 69-27 Senate vote marks a major victory for traditional retailers such as Minnesota-based Target and Best Buy, both of which have spent millions of dollars over the past decade trying to remove what they consider an unfair advantage for online sellers.

However, some experts believe House approval of online sales tax legislation will be far more difficult because of no-tax pledges signed by many House Republicans. A House version of the Marketplace Fairness Act has 65 co-sponsors but is stuck in a subcommittee.

"If it gets to an up-and-down vote on the floor, it would pass," said Democratic Rep. Betty McCollum of St. Paul, who is a co-sponsor of the House version of the bill. But McCollum says many Republicans who would vote for the bill refuse to take a stand before it gets to the floor.

Minnesota's two senators, Amy Klobuchar and Al Franken, both Democrats, co-sponsored the Senate's so-called Marketplace Fairness Act and voted for it.

The legislation allows states to require online and mail-order vendors to collect sales taxes at the time of sale and send it to the purchaser's home state. Right now, businesses without a physical presence in a state cannot be compelled to collect sales taxes.

Legally, online buyers are responsible for paying sales taxes, but most do not. Minnesota officials say the state loses $400 million a year in revenue as a result.

A memo on Friday from House Majority Leader Eric Cantor to members of his party outlining the May legislative agenda and highlights of the summer agenda makes no mention of online sales tax legislation.

Democratic Rep. Collin Peterson of Minnesota's Seventh District said that if House Republicans who took a no-tax pledge can't vote for a bill backed by mom-and-pop businesses as well as big businesses, "I don't know what they can vote for."

"We'll find out just how crazy some of these Republicans are," Peterson said.

A strong vote to end Senate debate on the bill in late April presaged Monday's easy Senate passage.

"This bipartisan bill is about leveling the playing field for Minnesota's Main Street businesses so they can compete with giants like eBay and Amazon," Franken said Monday.

Target, Best Buy and other retailers praised the vote.

"This legislation does not represent a new tax, rather it simply helps to ensure fair competition that ultimately benefits consumers and our communities," Best Buy said in a statement. "The current laws were put in place before the Internet or e-commerce even existed."

Online giant eBay had provided the major opposition to the bill, saying it would force small online retailers out of business. Anti-tax groups say it improperly lets elected officials in one state tax businesses in another. After years of lobbying, Amazon.com, the country's other huge online selling platform, has changed its position and supports the sales tax collection bill.

The legislation passed by the Senate and proposed in the House will not apply to online and mail order companies with less than $1 million in yearly gross out-of-state sales.

Jim Spencer • 612-673-4503