April 26, 2013

Online sales tax poised for Senate passage

But a proposal by Maine's senators to give retailers like L.L. Bean more time to comply with the new law appears to be left in limbo.

By Kevin Miller kmiller@pressherald.com
Staff Writer

WASHINGTON — A bill to allow states to collect taxes from online retailers inched forward in the Senate on Thursday, but a small, bipartisan group of opponents from states without sales taxes delayed work on the legislation for several days.

click image to enlarge

Joe Perron prepares packages to be shipped at the L.L. Bean warehouse in Freeport. States could force Internet retailers to collect sales taxes under a bill that passed a test vote in the Senate. Bean and other retailers hope for more time to comply.

Press Herald file photo/Shawn Patrick Ouellette

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The bill, which would force many online shoppers to pay sales taxes for the first time, appears poised for easy passage when the Senate returns in early May after a one-week recess. But opponents blocked consideration of several amendments, leaving in procedural limbo a proposal by Maine's senators to give retailers more time to comply with the new law.

Maine-based L.L. Bean -- a major online seller and one of the state's largest employers -- and other retailers sought the extension.

"The bill still has to go through the House and go to the president, so there is a fair amount of time that is going to elapse," said Sen. Angus King, who co-sponsored the amendment with Sen. Susan Collins. "We are going to try to get the amendment attached either here or in the House."

The online sales tax bill has broad bipartisan support in the Senate but could face opposition in the House. Online retailers with more than $1 million in annual sales would have to collect taxes and make the payments to buyers' home states.

Supporters say the measure is needed to "level the playing field" between the growing online retail market and traditional retailers -- especially small stores -- who are required to collect sales taxes.

But a minority of senators, from states without sales taxes including New Hampshire, succeeded in delaying votes on the measure. They say the bill would unfairly burden small businesses in their states.

"The proponents of the bill talk about this being a way to be fair to retailers. Well, it's not fair to our retailers," said New Hampshire's Sen. Jeanne Shaheen, a Democrat, before Thursday's vote. "I think giving states the ability to opt out, or an exemption, makes sense."

According to the National Conference of State Legislatures, states missed out on an estimated $23 billion in taxes on online sales last year. Under current law, shoppers who live in states with sales or use taxes should pay those taxes, often on their income tax filings. But few do.

In 2011, only about 10 percent of Maine tax filers paid an additional "use tax" for out-of-state purchases, returning $2.8 million to the state.

Maine Revenue Services estimates that the state misses out on $15 million to $25 million a year in tax revenue from online sales.

On Thursday, King and Collins tried to introduce an amendment to give retailers one year to begin collecting taxes from online buyers. But opponents blocked consideration of that and several other amendments. Under the Senate's complex rules, it was unclear Thursday whether the attempt to delay implementation will be considered in early May.

"This is not a new concept in any way. It has been talked about at length for over a decade," Collins said in response to opponents' complaints that the bill bypassed committee review. "If this bill were so problematic for retailers across the country, why would it have the support of so many retailers?"

L.L. Bean and other retailers want the longer time frame so they can set up computer programs capable of navigating thousands of state and local tax codes across the country. The majority of sales by L.L. Bean occur online or through catalogs.

"We're not opposed to the legislation, we just think the implementation time needs to be reasonable," said Carolyn Beem, spokeswoman for the Freeport-based company.

While even a year is "on the short end," Beem said it is preferable to the 180-day window in the current version.

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