By Paul Merrion, Crain News Service
CHICAGO (Feb. 19, 2013) — A bill allowing states to collect sales tax from online retailers was reintroduced by Sen. Dick Durbin on Feb. 14 with changes designed to broaden support among small businesses.
The issue is particularly important to both online and brick-and-mortar retailers in Illinois, because of a state law that requires them to collect sales taxes from their customers in Illinois. That puts them at a disadvantage to out-of-state retailers doing business in Illinois.
"I think the stars are starting to line up," said the Illinois Democrat. "I think our coalition is coming together even stronger than before."
This time around, the Marketplace Fairness Act has bipartisan sponsorship from 18 senators and 35 representatives. Mr. Durbin, the Senate's second-ranking Democrat, said Senate Majority Leader Harry Reid, D-Nev., is eager to move the bill as quickly as possible.
"This will put Illinois on equal footing with retailers elsewhere," said David Vite, president and CEO of the Illinois Retail Merchants Association. "Maybe, just maybe it will allow Illinois retail to grow and prosper."
The new Durbin bill contains a dozen changes to overcome past objections raised by states and retailers. It increased the exemption for small online retailers to $1 million in annual sales, up from $500,000, same as in previous House versions. If sales exceed that level the retailer would have to start collecting taxes in the following year.
"The Marketplace Fairness Act will correct a system that has given a significant and unfair competitive advantage to a handful of online-only retailers, while hurting those that create jobs and invest in local communities," said Sears Holdings Corp. in a statement. "We are grateful to the sponsors and cosponsors of this bipartisan legislation and look forward to working together to enact it."
The bill also would require states to provide tax software to retailers, if they request it, to make compliance easier. Other changes will clarify that if an online business is subject to a state's sales tax, it won't have to pay other business taxes in that state, too.
The hope is that the bill will move quickly, ahead of this year's focus on comprehensive tax reform, Mr. Durbin said. "That would suggest this is a federal tax," he added. "This is all state and local taxes."
This report appeared in Crain's Chicago Business magazine, a Chicago-based sister publication of Tire Business.