With states strapped for cash, never has the shortfall from uncollected sales taxes from online sales — estimated to total $23 billion this year — hurt more.
To redress the imbalance, ICSC is working to revive the Main Street Fairness Act, a measure that would require online retailers to collect sales taxes in the same way that brick-and-mortar stores do.
“We anticipate our longtime champion in the Senate, Senator Michael B. Enzi [of Wyoming], will introduce a bill in this Congress,” said Leslie McDowell, ICSC’s director of legislative outreach. “A new sponsor is needed in the House.” Former Rep. William D. Delahunt, of Massachusetts, who last June introduced the bill in the House, retired from Congress in January. (The Senate did not take up the bill.)
The measure would allow those states that have adopted a uniform method of collecting sales taxes — the so-called Streamlined Sales and Use Tax Agreement — to require Internet retailers to collect taxes. So far 24 states have signed on, and Hawaii, Idaho, Maine and Missouri have introduced legislation to adopt the measure this year.
Currently, online retailers are required to collect taxes in a particular state only if they have a physical presence there, such as a store or a warehouse.
One way struggling states are seeking to collect sales-tax revenue is through so-called Affiliate Nexus bills. These bills, sometimes known as “Amazon laws” (for Amazon.com), expand the definition of physical presence to include companies within the state that have set up a commission-based marketing program that redirects or refers a customer to an online retailer through links on their Web sites. New York has such a law, requiring Amazon.com to collect sales taxes because it has links to the Web sites of businesses in that state. New York, in fact, was the first state to pass such legislation, in 2008. Rhode Island and North Carolina have since followed suit. An Affiliate Nexus bill in Illinois awaits Gov. Pat Quinn’s signature, and others have been proposed this year in California, Hawaii, Mississippi, New Mexico, Tennessee, Texas and Vermont. “We expect to see it come up in additional states as the year goes on,” said McDowell.
Amazon, meanwhile, is legally challenging New York’s law and also faces battles elsewhere. Although Texas has not passed an Affiliate Nexus law, the state did make an audit assessment against Amazon for $269 million in uncollected sales taxes, citing the company’s distribution facility in Texas. Amazon, which had plans to expand in Texas, said it would close that facility in April and withdraw from the state altogether.
ICSC is encouraging states to adopt streamlined sales-tax bills. “These bills simplify state sales-tax codes to level the playing field for all retailers, both remote and brick-and-mortar. Affiliate Nexus bills only address large online retailers that use a specific business structure, but we understand that they will help states get part of the way there,” McDowell said.
Passing Streamlined Sales and Use Tax Agreement bills could help plug massive budget holes using the $23 billion that a University of Tennessee study said they will otherwise lose this year.
Compiled by the staff of Shopping Centers Today. © February 25, 2011 International Council of Shopping Centers.