Current tax scheme may be hurting key services

A Democrat from Massachusetts, Rep. Bill Delahunt, has proposed new legislation that would remove the protections online retailers have enjoyed in terms of state sales taxes. At present, people buying from an out-of-state website are not required to pay the sales taxes that would normally be owed at a retail shop. The US Supreme Court has ruled that without new law, out-of-state retailers cannot be made to collect sales tax.

Although the status quo has helped to grow vendors like Amazon and eBay -- active opponents of the bill -- the backers of equal taxation have long noted that online exemption hurts state budgets, making it harder to pay for government services like schools and police. The National Conference of State Legislatures has praised Delahunt's bill, suggesting it may return as much as $23 billion to state coffers, if enacted. Another supporter of Delahunt is the Retail Industry Leaders Association, which has tax committee members including Walmart, Home Depot, Target and Ikea.

The bill's co-sponsoring representatives are Michael Capuano, John Conyers, Stephanie Herseth Sandlin and Peter Welch. None of them are Republicans, and beyond online retailers Delahunt is said to be opposed by some groups pushing for lower taxes in general.

To appease concerns about red tape, Delahunt's side is advocating the Streamlined Sales Tax Agreement, which was first created in 2002 by state tax officials and has since been adopted by 24 states in whole or in part. Participants must simplify tax codes and make them uniform. Another group complaining about the bill -- the AOL-, eBay- and Yahoo-supported NetChoice coalition -- claims that "the actual simplification achieved by the Streamlined Sales Tax Project is not nearly sufficient to convince Congress that it should abandon its role in protecting interstate commerce."

Companies like Amazon and eBay are technically required to pay local state sales taxes after voluntarily reporting the amount owed. Tax officials say, however, that few companies are actually submitting accurate figures.

By Electronista Staff