Lawmakers Mull Internet Sales Tax

May 2, 2013
By

Opponents of the internet tax argue that it will hurt businesses already struggling in a lean economy

WASHINGTON — Long before they were members of Congress, Scott Tipton and Jared Polis were the owners of retail businesses.

Tipton, 57, was the co-owner of Mesa Pottery, a pottery store in Cortez, a classic small town in the four corners region of Colorado. Polis, 37, was the founder of ProFlowers.com, an online retailer that he sold in 2006 for a reported $477 million.

Tipton is a Cortez Republican and Polis a Boulder Democrat, but both have criticized legislation in Congress to tax online commercial sales as a burden on retail businesses that don’t conform to the suburban-shopping mall stereotype.

“[Tipton]‘s opposed to it. His primary reason is that we should give every incentive to make it easier to grow a business, especially in rural areas to make ends meet, whether it’s through eBay or Amazon.com,” Tipton’s spokesman, Josh Green, said in an interview. He added that smaller companies that do business with eBay and Amazon would likely be taxed indirectly if the bill became law.

On Tuesday, Polis met with the owner and employees of Pro’s Closet, a Boulder-based retailer that sells bicycles online. While Polis released a statement Wednesday that indicated he has not taken a position on the legislation, the lawmaker told a Fort-Collins newspaper last week that he was worried about the bill’s potential impact on online retailers.

Tipton and Polis’ argument finds an echo in the rhetoric of Gregory Golyansky, the president of the Colorado Taxpayers Union. “Killing the goose that laid the golden egg is not a good idea,” he said in an interview.

Arguing that an online sales tax will hurt non-standard issue retailers is a new tactic for opponents and critics of the legislation.

During the debate in the Senate last week, opponents criticized the bill mainly on procedural and technical grounds. Sen. Max Baucus (D-Mont.) raised the specter of out-of-state audits of online sales companies, which he said would be “oppressive in duration.”

The arguments did not sway enough senators undecided or supportive of the bipartisan legislation. The vote was 63-30. The bill cleared its final legislative hurdle in the upper chamber and is set to be voted on when senators return to Washington on May 6.

Supporters of the Internet sales tax argue that online companies enjoyed an unfair advantage over brick-and-mortar businesses because consumers don’t pay the tax at the point of sale.

“This common sense, bipartisan idea will level the playing field for Colorado businesses and close a loophole that artificially gives out-of-state retailers an unfair advantage,” Sen. Mark Udall (D-Colo.) said in March.

The legislation seeks to make concessions to smaller retailers.

It would allow states to require online businesses or “remote sellers” to pay a sales tax. It requires states to provide software to businesses to calculate the sales tax. Internet companies that did not earn more than $1 million in the preceding calendar year would not be required to charge customers a sales tax.  And supporters note, online customers are required to pay sales tax when they fill out their income tax returns, although few people follow the rule.

Yet any tax is a daunting notion to opponents during such lean economic times. “It’s kind of like, ‘What is the best kind of STD?’”, Green said.

Gauging public opinion of the bill is difficult. No independent poll on public attitudes toward Internet sales tax has been released since Gallup’s survey in January 2000.

The reaction of the federal courts is also uncertain. The Supreme Court ruled in 1992 that only brick-and-mortar retailers are required to charge customers a sales tax at the point of exchange. And a federal district judge last spring struck down a Colorado sales tax law approved in 2010.

Supporters and opponents of the Senate legislation disagree about the bill’s prospects for becoming law. While President Obama has said he supports the legislation strongly, the Republican-controlled House of Representatives will be a more hostile venue for the bill.

“We’re pretty confident that if a House committee considers it, we’ll get a yes,” Max Behlke, manager of state-federal relations at the National Conference of State Legislatures, said in an interview. His organization supports the bill.

By contrast, both Green and another House aide doubt the full House will vote on the legislation.

The fate of the legislation may hinge on the advocacy efforts of supporters and opponents of the proposal.

On Wednesday, lobbyists for eBay met with Tipton’s staff. Earlier last month, lobbyists for the International Council of Shopping Centers met with the staffs of six of the seven House members from Colorado. Jennifer Platt, the vice president of federal operations for the organization, said that she traveled from New York and that three unpaid lobbyists from Colorado arrived to make their case to members.

If the bill becomes law, online consumers in Colorado would pay a 5-to7 cent sales tax, although rates vary in localities. It is expected to bring in $350 million to the state coffers and $23 billion to the nation’s, Behlke said.

Comments made by visitors are not representative of The Colorado Observer staff.

One Response to Lawmakers Mull Internet Sales Tax

  1. hsabin
    May 5, 2013 at 12:17 pm

    Utter Nonsense. Greed is driving these lawmakers to act. they see money flowing to their states while disregarding that it is their constituents who will be hurt. The B and M businesses in the state are doing just fine-at least here in Colorado and we don’t need this tax burden on local shoppers.

    The Internet has been around since 1995 for practical purposes and just NOW they are saying its unfair?

    Self-serving politicos are what are operating here!

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