There is an estimated $23 billion in uncollected state sales taxes out there, lost to online purchases from retailers who don't collect it and buyers who don't voluntarily pay it to the state.
State governments, many of which are cash-strapped in this economy, hope a new bill in Congress will help them collect.
Rep. Bill Delahunt, D-Mass., introduced the bill July 1, calling it the Main Street Fairness Act.
According to the National Council of State Legislatures, which supports the bill, it provides a mechanism for states to collect sales tax on purchases made from Internet retailers that don't have a physical presence in the state, such as Amazon or eBay.
Currently, you're supposed to send the state the tax on your Internet purchases, but few people do, and there's little the state can do to make you.
Not surprisingly, states would like to collect that money, and bricks-and-mortar stores, which do have to collect and remit sales taxes, also support making it easier to tax Internet purchases.
Delahunt's bill essentially gives Congress' blessing to the Streamlined Sales Tax Project, a group of states (about 20 so far) working to make their sales-tax laws more uniform and easier to understand. Those states could, under the provisions of the bill, tax sales without regard to where the seller is located.
Earlier this year, Virginia state Sen. Emmett Hanger, R-Augusta, introduced a bill in the General Assembly that would have required Internet retailers doing business in Virginia to collect the sales tax. It passed the state Senate but was tabled in a House committee. Hanger has also pushed for Virginia to fully join the Streamlined Sales Tax Project.
Hearings on Hanger's bill drew several owners of smaller retail shops around Virginia who said they're at a disadvantage against large out-of-state Internet retailers, since they always have to charge sales tax.
But there were also people who testified that if Internet retailers stopped doing business in the state over the issue, their businesses would be hurt. Amazon, for example, partners with retailers to sell items on the Internet, and the retailers could lose the benefit of that partnership if Amazon ended affiliate relationships in the state--as it has done in North Carolina over the same issue.
EBay opposes Delahunt's bill, posting a statement on its website saying the bill would "impose significant new costs on hundreds
Hanger supports Delahunt's bill, although he said Virginia will still need to conform its own laws if a federal law is enacted.
"I'm pleased that the federal government, now they're looking at the issue and trying to move some legislation. There's just a lot of inequity with it," he said.
Chelyen Davis: 540/368-5028
Email: cdavis@freelancestar.com