Online Fix for Sales Tax Dims in Congress

Prospects that federal action to resolve the fight over the sales taxation in states over online retailing dimmed Wednesday in Congress, after one senior lawmaker who is Republican said additional debate was needed prior to any legislation moving ahead.

The House Judiciary Committee Chairman Robert Goodlatte made the comments that reduced any likelihood that a Senate bill would be supported by the House empowering states to collect the sale tax on purchases made over the Internet.

The tax issue continues to be unsettled with retailers, including the ones with large businesses online, saying it is not fair that they have to collect sales tax on customer’s purchases while other shoppers buying from online retailers do not pay any sales tax. The difference in pricing gives an edge to the online businesses that do not have brick and mortar establishments.

State governments say they lose as much as $23 billion per year in sale taxes that go uncollected.

In May of 2013, the Senate approved legislation that would make it mandatory for most businesses in e-commerce to collect sales taxes for states.

However, the bill from the Senate suffers fundamental defects, said Goodlatte, worrying that businesses online could be targeted by aggressive tax agents from states and state auditors.

Goodlatte did not give any indication of when his Judiciary Committee was planning to formulate their own version of legislation regarding online sales tax.

The largest retailer online,, has a huge stake in this fight. For many years, Amazon has resisted the efforts by states to make the company collect sales tax for the purchases made by consumers, though now it does collect in 20 states.

Businesses on Internet are not required to collect the sales tax for a state unless they operate a store, warehouse or have some sort of physical presence in a state.

Under current law, people making purchases online in which no sales tax for a state is included are supposed to pay that sales tax themselves, but nearly everyone does not do so or even know that they have to.

Twelve states already have their own sale tax legislation for Internet, up for only three during 2009.