Governor urges Congress to require online businesses to collect sales tax

November 27, 2012

By Staff

NEW — 6 a.m. Nov. 27, 2012

Gov. Chris Gregoire urged Congress on Monday — Cyber Monday, the largest online shopping day all year — to require online businesses to collect sales tax.

The governor said Washington businesses face unfair competition from online and mail-order retailers that fail to collect sales taxes. Gregoire said Congress should address the issue by passing legislation to treat out-of-state sellers the same as local businesses.

The proposed Marketplace Fairness Act aims to give states the option to collect sales and use tax revenues from out-of-state sellers. U.S. Sens. Dick Durbin, D-Ill., Lamar Alexander, R-Tenn., and Mike Enzi, R-Wyo., introduced the bill a year ago.

Congress is now reconvening to address expiring tax provisions and the looming “fiscal cliff” crisis. Gregoire said the focus on taxation issues is a good opportunity to address the online sales tax legislation.

“Businesses should compete on price, quality and service, not on the ability of one class of competitor to avoid collecting sales tax,” she said in a statement. “It’s time for Congress to address the inequities that have given Internet and mail-order retailers an unfair competitive advantage over in-state retailers large and small.”

The measure does not aim to raise additional taxes, but to collect existing taxes that go uncollected. The measure could generate $558 million in state and local taxes during the 2013-15 biennium and $934 million by the 2015-17 biennium, according to the state Department of Revenue.

Often, brick-and-mortar retailers complain about serving as unwilling showrooms for online competitors. Consumers try out products in stores and then purchase them online, and skirt paying sales tax.

“Congress can and should close the Internet tax loophole by assuring fair and even sales tax responsibilities between traditional retailers and online-only vendors,” Sally Jewell, president and CEO of REI, and a Retail Industry Leaders Association board member, said in a statement. “In doing so, our federal representatives will also help state and local governments strengthen their balance sheets.”

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