Senator Ayotte Sponsors Bipartisan Bill Aimed At Keeping Internet Sales Tax Free

NHPR

US Senator Kelly Ayotte is pushing to keep the internet as much like New Hampshire as possible: Sales tax free

Earlier this week, we looked at how New Hampshire’s anti-tax attitude compares to other states.  (You can read that post here.)  Now, US Senator Kelly Ayotte is working on a bipartisan bill aimed at keeping internet sales (mostly) sales tax-free.  Here’s what Kathleen Callahan reports for the New Hampshire Business Review:

“If U.S. Sen. Kelly Ayotte gets her way, New Hampshire retailers that sell their goods online to residents of other states won’t have to collect and remit sales taxes back to those states.That’s the gist of a new bipartisan resolution, jointly introduced this week by New Hampshire Republican Ayotte and Sen. Ron Wyden, D-Ore., which opposes requiring small online retailers to collect and remit sales taxes for out-of-state sales.

It’s perhaps no surprise that Ayotte and Wyden are behind the resolution, as New Hampshire and Oregon are among only five states in the country that don’t impose a state sales tax…

Under current law, retailers don’t have to collect sales tax in states in which they don’t have a physical presence.

That means that if a New Hampshire-based retailer sells a product to a South Carolina resident, the seller isn’t required to levy her state’s 6 percent sales tax on the purchase.”

As Callahan reports, the Ayotte-Wyden bill is a counter-strike against another bill introduced last summer:

“In July, Sen. Dick Durbin, D-Ill., introduced the Main Street Fairness Act, which would establish federal guidelines that would require online retailers to collect sales tax and pass it along to the state in which the consumer resides.

The stated purpose of that bill was to level the playing field for bricks-and-mortar retailers, and to bring in money to state and local governments that rely on sales tax revenues…

As laid out in that bill, any state that simplified its tax system by agreeing to the provisions laid out in the ‘Streamlined Sales and Use Tax Agreement’ would have the authority to collect sales taxes owed to it by retailers in other states. So far, 24 states have begun that legislative process.”

On the New Hampshire side of the issue, there’s no doubt that requiring online vendors to keep track of out-of-state sales taxes would be a complicated issue.  And, as e-commerce continues to eat into the brick-and-mortar marketplace, those vendors with few (or no) physical locations have a distinct competitive edge under current law.

J. Stephen Conn / Flickr

Ohio's among the states that's taken a big hit thanks to the internet sales tax loophole

But, if you’re a state that does depend on sales tax revenue, the issue looks very different.  Take the case of Ohio.  The Cincinnati Business Courier reported last month that:

“A University of Cincinnati study…projects that state and local governments in Ohio are losing more than $200 million a year in sales tax revenues because the state doesn’t collect sales tax on Internet sales…

In addition to lost tax revenue, the state’s brick and mortar retailers are projected to lose as much as $600 million in sales this year due to the lack of tax collections on Internet retail transactions.”