Illinois could be losing $1 billion a year by not collecting sales tax on Internet purchases made outside the state, U.S. Sen. Dick Durbin said Thursday, and he's eager to plug that gap.
Speaking to members of the Naperville Area Chamber of Commerce, Durbin said he's seeking a sponsor for federal legislation to allow the state to collect those revenues from web purchases at the time of sale.
"I hope that the chambers will come out and support us," the Illinois Democrat, said. "This is something we can do and we should do and it would be a good shot in the arm for Illinois to get that revenue coming into our state."
Most online retailers do not charge Illinois sales tax, leaving the purchaser to pay the tax directly to the state's Department of Revenue. If a retailer has a physical "presence" in Illinois, which 68 of the top 100 online retailers do, they will collect sales tax on the purchase.
"I cannot believe, cannot understand, how people can buy so many things over the Internet and have them shipped to a residence in Naperville, Illinois, using your streets, your police, your traffic lights, your fire protection, your curbs and gutters without paying a penny in sales tax to the city of Naperville," Durbin said. "I cannot understand, for the life of me, why a coalition that should be standing up for a reasonable sales tax on sales to people in the state of Illinois hasn't been successful. You are losing so much revenue that should be coming back to the community."
State legislation, approved last year, grants shoppers who bought goods online, through the mail or over the phone and didn't pay sales tax on them between June 20, 2004, and the end of 2010 amnesty to pay those taxes until Oct. 15 of this year.
Department of Revenue spokeswoman Sue Hofer said the state also offers a more detailed line and work sheet on state income tax return forms this year designed to get taxpayers to pay the sales tax they owe on catalog, telephone or online items in which the retailer did not assess sales taxes,
"We believe people don't realize they owe tax on online purchases or don't realize they were not collected during the purchase process," she said. "But we believe the most effective way to ensure taxes are collected is for it to be collected at the point of purchase and that would require federal legislation."
The legislation has been attempted previously but has never been successful.
"Initially we couldn't pass this because the Internet community argued 'C'mon. We're just getting started. Don't sit on us. Give us a chance to grow,'" Durbin said. "Well they're up and running and I think they ought to be paying their fair share to maintain the infrastructure of the communities they serve. And they should be held to the same competitive standard as any business in this town that collects sales tax."
Christine Jeffries, president of the Naperville Development Partnership, pledged her organization's support saying Durbin's proposal would "help save Main Street."
"We've got people bidding on printing items and things like that. They're ordering it from Minnesota, Wisconsin anywhere on the Internet and they're getting underpriced by 7 percent to 10 percent," Jeffries said. "And the people who are here and have employees in Illinois are being undercut by out-of-state vendors."
John Schmitt, president and CEO of the Naperville chamber, said his organization will study the issue but hasn't yet taken a position.
Durbin, meanwhile, praised the city's leadership and its handling of the ongoing economic hardships.
"The (Naperville) business community today has a positive outlook because they have a great product," he said. "This is a very positive area of the state. Our state has a lot going for it but it also has challenges. Naperville just happens to have a lot of strength and that strength is going to help it recover sooner."
Durbin also made stops Thursday in Wheaton to speak to students in government and history classes at Wheaton Warrenville South High School and to meet with representatives from several suburban food pantries that have seen a major increase in demand over the past two years.