Governors lobby for online sales tax

Washington state Governor Chris Gregoire, and Tennessee Governor Bill Haslam, have written to Senate leaders urging them to pass legislation granting states the authority to collect sales taxes from online businesses. Some states like New York, already have this, and Massachusetts just announced a similar deal with Amazon today.

States lobbied for a federal levy at the recent National Conference of State Legislatures annual meeting, and a bill is there – the Marketplace Fairness Act, although the likelihood that it will move during the lame duck session seems questionable. State lawmakers have been pushing for a federal bill for at least a decade but it has failed to move forward. Now, there may be enough support for the measure as government at all levels hunt for revenues.

Writing for the National Governors Association, Governors Gregoire and Haslam argue that rather than a tax hike, the bill levels the playing field in terms of sales tax on merchants regardless of where they operate. Supporters have also argued that bringing sales tax online may also bring back some activity in downtown’s and brick and mortar stores. They are also arguing for timing, the Governors want the bill to move now rather than it getting swept up in looming broad based tax reform on tap for 2013.

In their letter, the Governors say states are losing out on $23 billion in ‘remote revenue,’ by being unable to collect this tax now. They also say that the current set up amounts to,”an unwarranted yet growing subsidy to Internet sellers at the expense of brick-and-mortar stores.”

Some online retailers are setting up state by state agreements even though they don’t want to, for these types of taxes. So far, Amazon has agreements with California, Kansas, Kentucky, New York, North Dakota, Pennsylvania, Texas, and Washington. Virginia and New Jersey are also slated to begin collecting in 2013. Amazon has proposed a bill like the Marketplace Fairness Act rather than continuing to set up individual agreements so it does look as though there is some business support for equalizing this levy.

Tennessee, Indiana, Nevada, and South Carolina are all examining agreements over the next five years provided the federal bill doesn’t move out of this session of Congress or the next. Some members of congress including Senator Mike Enzi have indicated their support for the bill despite the current freeze on lawmaking happening at the federal level.