WASHINGTON - Tax-free sales on the Internet are likely to end, as Republican governors are now joining their Democratic counterparts in calling for the collection of state sales taxes from online purchases, the Wall Street Journal reports.
The movement to tax Internet sales gained momentum recently when New Jersey Governor Chris Christie reached a deal with Amazon.com, whereby the online retailer would collect sales taxes from New Jersey residents in exchange for locating a distribution facility in the state.
"Having one of the most recognized and widely popular Republican leaders take this position gives other politicians comfort that the online sales tax is fair and helps state budgets in crisis," said Scott Mason, a vice president at Lowe's Cos., who said the company faces a 5% to 10% price disadvantage with online rivals.
Taxing online sales is projected to generate $23 billion in new annual revenue for states, according to the National Conference of State Legislatures, leveling the playing field between brick-and-mortar retailers and online sellers.
The move has received unprecedented bipartisan support as of late, and legislators are looking to speed passage of a bill that gives states the authority to compel online companies to collect sales taxes.
"It gets down to a basic issueï¿½ï¿½of simple fairness for small businesses that create jobs and opportunities all across America. And with the sales taxes they collect, they provide for local police and firemen, for the sewers and streets," said Senator Dick Durbin, co-sponsor of the bill.
While Republicans previously had opposed the measure as creating a new tax, cash-strapped states forced Republican governors to reconsider the idea.
"But the current economic environment made states start looking harder at this for new revenue that costs them nothing," said Sandy Kennedy, president of the Retail Industry Leaders Association. Getty Images
Florida officials recently dismissed Amazon's offer to locate facilities ï¿½" and up to 3,000 jobs ï¿½" in the state in exchange for deferring sales-tax collection until January 2014. "Amazon knows its days are numbered before a federal law is passed and came down here to make a fast deal," said Rick McAllister, president of the Florida Retail Federation. "Amazon's Holy Grail is to do same-day delivery to compete with our brick-and-mortar stores, but we let the governor's staff know the unfairness for it to avoid sales taxes for two Christmas seasons."
Amazon "has sought to create thousands of jobs in Florida, but the state's government hasn't shown much interest," said Paul Misener, Amazon's vice president of global public policy. "Without Florida's leadership, these thousands of jobs will be created in another state."
Seeking to avoid state-by-state fights, Amazon now backs the federal legislation. By 2014, it will be required to pay sales tax in at least 13 states.
Most other online retailers oppose the bill. NetChoice, a trade group representing eBay, Overstock.com and others, said the sales-tax burden would be complicated and fall disproportionately on small businesses that sell online. "Besides the Republican support, this position change is being driven by the millions of dollars being spent by the big-box retailersï¿½"and now Amazonï¿½"to push the sales tax through Congress," said Steve DelBianco, NetChoice executive director.