Congress is wading into the roiling dispute between states and giant internet retailer Amazon.com over collecting sales taxes on online purchases.
On Friday, Senator Dick Durbin introduced legislation that would require internet-only retailers to add sales taxes to customers' bills, just as their competitors with bricks-and-mortar stores do. Representative John Conyers Junior plans to introduce a similar measure in the House.
The congressional effort is aimed at closing a legal loophole created by a 1992 US Supreme Court decision that freed online and catalog sellers from the obligation of collecting sales taxes if their businesses had no physical presence in the state where a buyer lives.
"Consumers shouldn't have to face the burden of reporting all of their online purchases," Durbin said. "Main Street retailers collect sales taxes on behalf of consumers. Why shouldn't online retailers do the same?"
Article continues below
The nation's largest big-box retailers, as well as small businesses such as independent booksellers and specialty shops, have become increasingly vocal about what they see as an unfair advantage for online retailers.
Free of the obligation to collect sales taxes, Amazon, Overstock.com and other internet-only competitors can offer consumers the same merchandise substantially cheaper. The California base rate currently is 7.25 per cent, but that can swell to nearly 10 per cent with the addition of local sales taxes.
Total internet sales more than doubled to $2.4 trillion (Dh8.81 trillion) between 1999 and 2006, according to a 2009 study by the University of Tennessee. Annual state and local sales tax losses on e-commerce are forecast to hit $11.4 billion by next year, the study said.
"Government shouldn't be picking winners and losers by giving a handful of companies a competitive advantage over everyone else," said Katherine Lugar, executive vice president of the Retail Industry Leaders Association.
California and other large states, such as New York, Illinois and Texas, are attempting to enforce their own new laws that require Amazon and other online retailers to collect billions of dollars in sales taxes that are legally owed to the states.
Seattle-based Amazon is suing to overturn New York's law and has started a referendum campaign aimed at invalidating a California statute that took effect July 1.
California's internet sales tax measure is projected to bring in an additional $317 million in state and local revenue by June 30, the governor's office forecasts. Tax payments are expected to grow in upcoming years.
Amazon has said it will not collect sales tax on purchases by California customers. But the company on Friday wrote to Durbin and Conyers saying it would support a national effort to create "a simple, nationwide system of state and local sales tax collection, evenhandedly applied to all sellers, no matter their business model, location or level of remote sales".
Online auction giant eBay said it opposes the Durbin bill because it would "harm small internet retailers" that sell products using the eBay website.
"Forcing small businesses to take on the same costs and tax burdens as national retail businesses is unrealistic, unfair and will unbalance the playing field between giant retailers and small business retailers on the internet," said Brian Bieron, eBay's senior director of federal government relations and global public policy.
Unless it happens swiftly, any action by Congress on the Durbin bill is unlikely to head off an expected referendum on California's so-called Amazon tax law.
The online retailer has begun collecting signatures from registered voters to get the measure on the ballot next year, probably in June.