U.S. Senate lawmakers are considering a bill that will for the first time place a sales tax on retailers that sell items online, The Daily Signal reported.
The House already approved an extension of an existing bill that bans any states from charging customers to surf the Internet. But the Senate hopes to add a few changes to the bill by allowing states to finally cash in on the lucrative world of online shopping.
State governments would be free to tax out-of-state online retailers for selling products to in-state residents, a bill that will place a smile on the faces of small business owners who are losing money to retailers outside the state.
"It's very difficult to compete when online retailers can price something up to 10 percent less than brick and-mortar stores can," David French, senior vice president of government relations at the National Retail Federation, told The Daily Signal.
"We are not defending sales tax," French added. "If Congress wanted to ban the sales tax we would be all for it. But if you are going to have it, it ought to be applied fairly."
If the Senate's bill comes to fruition, it would be combined with the House measure into one super bill titled the Marketplace and Internet Tax Fairness Act. Online retailers are against any sales tax bill.
"These are separates issues that should not be combined in any way," Steve DelBianco, head of NetChoice, which represents Internet-based firms like Yahoo and Facebook, told the Daily Signal.
Opponents also say online retailers would not be able to make sense of the labyrinth of State and local tax laws they would have to follow.
States are currently not allowed to collect sales tax from retailers that are not physically in-state. Telecommunications expert James Gattuso told The Daily Signal that imposing such a tax violates federalism.
"You have citizens in one state being subjected to laws in other states where they don't live, work or vote."
In the meantime, the current law banning taxes on Internet access is set to expire Nov. 1. The approaching deadline, along with upcoming midterm elections, only places added pressure on the Senate to reach an agreement.
