Dayton Business Journal...
Senators eye tax collection for online sales
by Brian Reisinger, Staff Reporter
Monday, October 31, 2011 

Photo: Sen. Lamar Alexander, R-Tenn. 

A federal lawmaker from Tennessee is developing legislation that would enable states to require online retailers collect sales taxes that consumers are supposed to be paying by law. 

U.S. Sen. Lamar Alexander’s office confirmed last week that the Tennessee Republican is working on the legislation with U.S. Sen. Mike Enzi, R-Wyoming. 

“I hope that we can introduce legislation quickly, and that it will be bipartisan,” Alexander told the Nashville Business Journal last week. 

At issue is whether online retailers such as Amazon.com    (NASDAQ: AMZN) should have to collect sales taxes in states where they’re making sales, not just where they have physical operations. Currently, online shoppers are supposed to report purchases for tax purposes --— called “use taxes” in Ohio — but usually don’t. 

In Ohio, more than 60 percent of households made at least one online purchase in 2010, but less than 1 percent of state income tax returns included tax payments on Internet transactions, a study by the University of Cincinnati’s Economics Center found. 

Ohio governments will lose more than $200 million this year because online shoppers do not report Internet purchases on their tax forms, according to Focus on Ohio’s Future, the research arm of the Council of Retail Merchants. Losses for Ohio retailers will be triple that —$600 million, the research entity found. 

A group of Central Ohio business owners is supporting efforts by organizations such as the Ohio Council of Retail Merchants    to push federal lawmakers to change the law and close the tax loophole. 

Federal legislation would aim to relieve states of the dilemma. Alexander said his legislation would offer states the option of joining the nationally streamlined sales tax system or meeting minimum requirements, with the goal of creating consistent collection requirements for online retailers that operate nationally. 

That would draw on aspects of the Main Street Fairness Act currently circulating in the U.S. Senate and the Marketplace Equity Act recently introduced into the U.S. House of Representatives    . 

The latter proposal has drawn the most buzz of late because it requires less of states, and both Amazon and traditional retailers have pledged to push such national legislation. Other online retailers – not all of which have had high-profile fights with individual states – have been split on the need for a national solution. 

Alexander cast the issue as a matter of states’ rights to have online retailers collect taxes already due. He wants states to be able to pick the requirements they’ll put in place and also be able to opt out and not have online retailers collect. 

“The former governor in me comes out pretty strongly here,” Alexander said, in reference to his tenure as Tennessee governor and dealing with federal mandates. 

That could, in theory, allow a state to offer no sales tax collection as an incentive to online retailers – which was at the heart of Tennessee’s dilemma – but Alexander said that option is a state’s right. He thinks the ongoing state-level battles with online retailers and the passage of a bipartisan national option will, for the most part, solve the issue. 

The legislation risks becoming unpopular if consumers perceive it as a tax increase, and Alexander said he’s prepared to rebut Republicans who see it that way. The tax is supposed to be collected, he said, and Republicans should see the value in protecting states. 

The entry of Alexander, who recently stepped down from Republican leadership, could help with another issue: getting priority in a tension-filled Congress. If it does, the legislation will face the court of public opinion and could be subject to debate among stakeholders united behind the push for national action. 

Read this and other articles at Dayton Business Journal