updated 04:10 pm EDT, Mon August 1, 2011
E-tailers could be liable to pay uncollected taxes
US Senator Dick Durbin, along with US Representatives John Conyers and Heath Shuler introduced legislation that could require on-line retailers to collect sales tax for purchases made, even from customers in states where the e-tailers have no physical presence. The bill, known as the Main Street Fairness Act, would give states authority to require retailers, regardless of their physical location, to collect sales taxes in the future as well as pay retroactively for taxes already owed. The bill does not propose any new taxes, but rather intends to close an existing loophole.
Under a 1992 Supreme Court ruling, known as the Quill decision, retailers are only required to collect sales tax in states where they have a physical presence, which the court defined as a retail outlet or a sales force. Since then, online retailers, such as Amazon, have been able to conduct business without collecting local or state sales taxes. In theory, the individual making that purchase is responsible to declare any such purchases and pay the associated taxes to the state in which they live. Senator Durban claims that in 2012, the amount of uncollected taxes will amount to over $24 billion.
The Senator contends that the legislation, if passed, would level the playing field for local businesses, which still have to collect these taxes. He was quick to point out that the legislation does not raise taxes, but rather would helps local and state governments collect previously unrecoverable revenues. A key provision of the bill is that consumers wouldn't be liable for any portion of the previous taxes owed, only the online retailers.
Senator Durban asserts that this legislation has the support of large retailers including both Amazon and Sears. Amazon has not officially commented on the legislation, although the company did send the Senator a letter offering to cooperate.
"Introduction of your bill returns the discussion of interstate collection of sales tax to Congress, which the Supreme Court says is the appropriate forum to resolve the issue," said Paul Misener, Amazon's Vice President for Global Public Policy. "Amazon looks forward to working with you and your colleagues in Congress to help enact sales tax collection legislation."
The statement is a contrast to Amazon's approach to state taxes in the past, where it has pulled affiliate programs whenever a state enacted, or sometimes even just propsed, a law requiring state tax collection. Amazon has typically argued that the measures are too complex but has also usually been keen to keep prices as low as possible. Senator Durbin's measure might have circumvented these objections by reducing Amazon's overhead.