Measure to Let States Tax Online Sales Advances in Senate

April 23 (Bloomberg) -- Scott Galloway, Chairman of Firebrand, discusses the impact of an online sales tax at Amazon. He speaks on Bloomberg Television's "Bloomberg Surveillance." (Source: Bloomberg)

The U.S. Senate advanced legislation that would let states collect taxes on out-of-state sellers, including sales over the Internet and through catalogs.

The 74-20 vote overcomes a procedural hurdle. A final vote on the measure, which is supported by the Obama administration, may come later this week.

Wal-Mart Stores Inc. (WMT), Best Buy Co. (BBY), state governments and shopping mall owners back the measure sponsored by Senator Mike Enzi, a Wyoming Republican. Opponents include antitax groups, direct marketers, EBay Inc. (EBAY) and Senator Max Baucus, a Montana Democrat and chairman of the Senate Finance Committee. Baucus represents one of five states without a sales tax.

Supporters say brick-and-mortar retailers have a competitive disadvantage with Internet-based sellers and others, costing state governments an estimated $24 billion a year in forgone revenue.

In a statement supporting the measure, the Obama administration said it would “level the playing field for local small business retailers” that compete with online and catalog retailers that don’t collect sales taxes.

Opponents maintain the bill would let state governments reach outside their borders and unfairly burden small businesses.

If passed, the measure’s prospects in the House of Representatives are uncertain. Companion legislation has support from 56 lawmakers, or 13 percent of the House.

That list doesn’t include Representative Bob Goodlatte of Virginia, chairman of the House Judiciary Committee. In a statement, Goodlatte said he understands retailers’ concerns, though the bill “has a long way to go” before it can gain his support.

“There is still not uniformity on definitions and tax rates, so businesses would still be forced to wade through potentially hundreds of tax rates and a host of different tax codes and definitions,” he said.

The bill is S. 743. The House bill is H.R. 684.

To contact the reporter on this story: Richard Rubin in Washington at rrubin12@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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