Internet Tax Decision by Congress Not Expected This Year

Legislation that could have mandated new online sales taxes across the U.S. aren't expected to move forward during the last weeks of the lame duck Congress.

Internet tax

Proposed legislation mandating Internet taxes for online purchases across the nation won't be considered by the lame duck Congress this year after U.S. House Speaker John Boehner said he has "significant concerns" about an existing Senate plan for such taxes.

Boehner's comments about not reviewing the Internet tax legislation this year were reported in a Nov. 11 story by The Wall Street Journal. A previously approved moratorium on broadly collected taxes on Internet-based purchases will expire on Dec. 11, making the issue more complicated for the nation's 9,600 state and local taxing authorities that are waiting to find out if they will ever be able to tax Internet purchases as a new revenue stream.

The proposed Senate plan, which is being led through a bipartisan effort by Senate Majority Leader Harry Reid (D-Nev.) and Sens. Dick Durbin (D., Ill.) and Mike Enzi (R., Wyo.), "has been trying to meld the popular moratorium with a separate measure that would force online merchants to collect sales taxes for all of those 9,600 revenue departments, even in places where the merchants have no physical presence," The Journal reported.

The issue was taken off the table for now, the newspaper reported, after Boehner's spokesman, Kevin Smith, said that Boehner was not happy with the Senate proposals. "The Speaker has made clear in the past he has significant concerns about the bill, and it won't move forward this year," Smith told the paper. At this point, Smith continued, "the House and Senate should work together to extend the moratorium on Internet taxation without further delay."

Boehner's stand to let the Senate bill die without a vote this year won't be celebrated by retailers, which have been seeking uniform tax collection processes for online purchases across the nation. Many retailers see Internet tax legislation as a way of leveling the playing field with online merchants that don't have the expenses of running brick-and-mortar stores, according to a Nov. 10 report by the Financial Times.

"Retailers such as Walmart, Target and Best Buy have long railed against a perceived loophole that they say gives e-commerce rivals an unfair advantage by enabling many online shoppers to avoid sales tax," the Financial Times reported. "The announcement is a blow to retailers which had calculated that the bill had a better chance of passing this year—with control split between Republicans and Democrats—than in a new Congress controlled by Republicans."

One issue that continues to make the issue difficult for Congress is that many conservatives in the House and Senate "have complained that the bill amounts to a new tax and would expand states' authority by enabling them to collect tax via online businesses in other jurisdictions," the article reported.

Internet tax proposals and battles have been going on for years. When Internet retailing began, tax moratoriums were established to give nascent online businesses a chance to get started and reach critical success levels. Now many competing retailers say that such benefits are no longer needed and that taxes should be collected to make things fair for all businesses.

In December 2013, the U.S. Supreme Court decided not to hear a sales tax case between, and the state of New York, continuing the indecision over such taxes, according to a previous eWEEK story. New York had argued that even though Amazon had no facilities and no employees in the state that any partnership that Amazon might have in New York meant that it was in business there. Such an approach meant that any New York-based suppliers, including book companies, should trigger that exposure to sales tax. The Supreme Court avoided the issue by choosing not to hear the case, but the issues remain across the nation.