New Internet Sales Tax bill (The Main Street Fairness Act) faces opposition

Yesterday, Representative William Delahunt (D-MA) introduced the "Main Street Fairness Act" in Congress that would allow states to collect sales tax for online purchases. The bill, H.R 5660 is described as an attempt to "promote simplification and fairness in the administration and collection of sales and use taxes, and for other purposes."

The bill was praised by the National Conference of State Legislatures (NCSL) yesterday as an equalizer that creates a level playing field for all sellers, regardless of their status as a brick-and-mortar retailer or as a purely online seller.

"Congressman Delahunt's willingness to work with everyone involved in the sales tax simplification effort is to be commended," said Iowa Representative Christopher Rants, co-chair of the NCSL Task Force on State & Local Taxation of Communications and Electronic Commerce. "With the adoption of the Delahunt legislation, at a time when states are facing historic budget gaps, Congress can provide fiscal relief, $23 billion, for the states without a single penny of cost to the federal government."

Online retailer eBay today, however, aired its opposition to the legislation.

"Year after year supporters of increased Internet sales taxes recommend legislation that would impose significant new costs on hundreds of thousands of online small businesses and ecommerce entrepreneurs, which is sure to harm the economy and kill small business jobs," a statement from the online auction company said today. "At a time when unemployment rates are high and small businesses across the country are closing shop, we are confident that Congress will protect small internet retailers and the consumers they serve from another Internet tax scheme."

To date, 24 states have enacted similar legislation that requires collection of sales tax records from all remote sellers not qualifying for the small business exception. Some of these are being challenged on the state level as well.

This week, for example, the Direct Marketing Association (DMA) filed a federal lawsuit (.PDF here) against the state of Colorado for its Internet Sales Tax law (HB 1193), because it requires out of state retailers to turn over the purchasing history of Colorado customers to the state's Department of Revenue.

"The new law and the regulations implementing it are an unconstitutional and blatant violation of Colorado consumers' privacy," Jerry Cerasale, Senior Vice President of Government Affairs for the DMA said this week.  "The law may have been passed in the hope of balancing the state budget through increased use tax reporting by Colorado residents, but it has serious adverse consequences for consumers and businesses."