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Senate excludes internet sales tax provision from defense bill

Dick Durbin

An effort by three U.S. senators to include an internet sales tax amendment to the National Defense Authorization Act failed last week after the Senate voted to adopt the legislation without voting on the controversial provision.

Sens. Dick Durbin (D-Ill.), Mike Enzi (R-Wyo.) and Lamar Alexander (R-Tenn.) proposed the Marketplace Fairness Act, which would overturn a 1992 Supreme Court ruling requiring retailers to maintain a physical store in order to collect sales tax, as an amendment to the NDAA, according to the Examiner.

The Senate, however, voted on Dec. 3 to close debate on the bill and move towards a final vote without considering the amendment. The congressmen may still try to find another bill to which they could add the provision.

“Senator Durbin is working with his colleagues…to look for any opportunity to move the bill,” a spokesman for Durbin said, Computer World reports. “He is keeping all of his options open, whether that be to work for a vote on the bill as a stand-alone or part of a larger piece of legislation.”

Proponents of the measure maintain that the current sales tax system is unfair to physical retailers, who have to add approximately 10 percent in tax charges, and to states, which lose billions of dollars in tax revenue.

“As the nature of retailing evolves and Internet sales become a more prominent portion of total retail sales, it is critical that sales tax collection requirements not discriminate,” David French, the senior vice president for government relations at the National Retail Federation, said in a letter urging lawmakers to support the provision, according to eCommerce Bytes. “The current collection disparity has tilted the competitive landscape against local stores, creating a crisis for brick-and-mortar retailers around the country. This amendment will bring a level playing field for local and online retailers alike and provide a business climate in which retailers have a better opportunity to grow and create jobs in a truly competitive marketplace.”

Several trade groups, including the Computer and Communications Industry Association and NetChoice, and online retailers like eBay have opposed Durbin’s effort to include the amendment with the defense bill.

Ed Black, the president and CEO of CCIA, said that the amendment would “allow states to penalize the innovative e-commerce business model by targeting small online businesses as convenient sources [and collectors] of revenue,” eCommerce Bytes reports.

eBay appealed to its merchants to contact their congressmen to voice their opposition to the provision.

“They would get rid of state borders from the perspective of tax law,” Brian Bieron, the senior director of U.S. government relations and global policy at eBay, said, according to eCommerce Bytes. “Right now, only a really giant retailer with stores or distribution centers all across the country [has] to collect sales taxes basically everywhere. Those giant retailers are trying to change the law so that every small business has that same tax burden. That would directly increase costs for small retailers. It also means that small business retailers could actually face audits and law enforcement action from any state where they have customers.”

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