A bipartisan group of U.S. senators was expected to introduce a bill Wednesday that would give states the right to tax online sales, but not in time to affect the upcoming holiday shopping season.
The measure is thought to be broader than similar legislation introduced in the Senate last July, according to Reuters
, which reports that the proposal is supported by so-called big box retailers like Wal-Mart Stores Inc. and Target Corp. The giant retailers view Internet-only retailers as a competitive threat.
Retailers are exempted from collecting taxes on sales in states where they do not have a physical presence based on a 1992 Supreme Court ruling, which essentially provides tax-free shopping for many Internet purchases.
While consumers stand to lose this significant benefit of cyber shopping, states and local governments are expected to lose $24 billion in uncollected taxes next year if lawmakers fail to act.
Republican sponsors were expected to include Senators Lamar Alexander, Mike Enzi, Roy Blunt and John Boozman. Democratic proponents were expected to include Senators Richard Durbin, Tim Johnson and Jack Reed. Durbin sponsored similar legislation this summer.
The White House is also expected to endorse the bill, however it will almost certainly face opposition.
Senate Democrat Ron Wyden and Republican Kelly Ayotte have already introduced a resolution calling on Congress not to authorize state governments to collect online sales taxes, according to Reuters. A similar resolution was introduced in the House last February.
The House of Representatives has been considering its own version of an online tax bill. The House measure is thought to affect fewer small businesses because it includes a higher exemption threshold than the Senate bill being introduced on Wednesday.
The Senate bill would exempt businesses with less than $500,000 in annual sales while the House measure would allow sales of up to $1 million.
Danny Diaz, a spokesman for the Alliance for Main Street Fairness, which represents retail chain stores, such as Wal-Mart, told Reuters that the storefront retail industry "strongly stands by the legislation being introduced because it levels the playing field." The president of Overstock.com Inc. has advocated a much higher exemption of $20 million.
Supporters hope the supercommittee will add a sales tax proposal to its recommendations later this month.
Backers want the online tax bill to be swept up in bipartisan support for a bill that would eliminate the three percent withholding on payments to government contractors, according to Reuters.
That bill already passed the House and is expected to also win approval in the Senate this week.
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