Congress Considers Internet Sales Tax
December 1, 2011
Just days after Cyber Monday 2011 set a record with $1.25
billion in online purchases, Congress is reviewing
three separate bills that would require Internet retailers to collect sales
taxes in states where they have no physical presence. If the legislation
passes, retailers like Amazon and eBay would be forced to tax consumers for
purchases in as many as 45 states, resulting in estimated additional revenues
of more than $23 billion annually. "This is not a new tax we're
collecting," said Rep. John Otto (R-TX). "It's a tax we've been
unable to collect."
While there is no federal mandate on Internet sales tax
collection, the current precedent was set by the 1992 U.S. Supreme Court
decision in Quill v. North Dakota.
In its ruling, the High Court said a business must have an office or retail
shop in a state to be compelled to collect taxes there. However, justices also
said at the time that Congress had the right to overrule the decision through
future legislation. Presently, consumers are supposed to pay taxes on their own
for purchases made online from another state, although it's believed that very
few actually do so.
In a U.S. House Judiciary Committee hearing yesterday,
Internet retailers offered different viewpoints about the proposed bills.
Amazon, the world's largest online retailer, reversed its prior position and
announced its support for Internet sales taxes. "With today's computing
and communications technology, widespread collection no longer would be an
unconstitutional burden on interstate commerce," said Paul Misener, Amazon's vice president for global public policy.
"Congress feasibly can authorize the states to require all but the very
smallest volume sellers to collect."
Among those opposing the legislation are Amazon's chief
rivals eBay and Overstock.com, which argue the new laws would benefit large
retailers like Wal-Mart that already enjoy marketplace advantages. "The
real world effect will be to disadvantage small business retailers, a segment
of retailers that is already losing market share under the status quo,"
said Tod Cohen, deputy general counsel for eBay.
Wednesday's Judiciary hearing was only an opening round in
the legislative debate over the Internet tax bills. No Congressional votes have
yet been scheduled.