A bill in the U.S. Senate that would close an Internet sales tax loophole is gaining momentum and has the support of at least one major online retailer, U.S. Sen. Dick Durbin said Friday in Naperville.
The Marketplace Fairness Act would allow states to require all Internet sellers -- even those that don't operate a physical location in the state -- to charge and pay sales tax.
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"The battle has been going on now for more than 10 years. The Internet sellers have resisted the idea of collecting sales tax," Durbin said. "Well, that's changed."
Amazon.com, the nation's largest Internet retailer, now supports the bill. It needs the support of at least six more Republican senators before being brought for a vote, but "2012 could be the year" to pass online sales tax legislation, Durbin said.
"This is not a new tax; it is an existing tax. It is sales tax already owed," he said. "What we are doing is really pushing for compliance, pushing for collection so that the money comes back to the community. I think that is a reasonable thing."
Small business owners who gathered Friday at Anderson's Bookshop in downtown Naperville said the act would put their storefronts in a more equal competitive environment with Internet-based companies.
"Online retailers are exploiting a decades-old loophole. This (sales tax) policy was developed before the Internet really existed so everything in the whole game has changed," said Becky Anderson, one of the book store's owners. "I think it's essential that we get this through and I think it would have such needed revenue for everybody."
If the Marketplace Fairness Act becomes federal law, states will have to adopt their own legislation simplifying the tax code and allowing for software to determine how much sales tax must be charged based on a buyer's address.
Some states already have such a law, but Durbin said Illinois does not.
"The adoption of the legislation creates the software so the retailers don't have to do the (sales tax) calculation. All they need to do is report the address," Durbin said.
State and local sales taxes then would be added to each item's purchase price.
What's left to be determined within the bill is a possible exemption for small businesses. States may be prohibited from requiring online businesses that sell less than $500,000 of merchandise annually to charge sales tax, but that is not set in stone.
Greg Gordon, owner of Dog Patch Pet & Feed in Naperville, said he can see both sides of the argument about whether online retailers should be mandated to charge their customers sales tax.
"As a consumer, I'm against it, but as a business owner, I'm all for it," he said.
If the act passes, Durbin said it will create a fairer environment between physical and online stores and hold consumers accountable for paying sales tax on online purchases.
"We'll be at a point where we should have been a long time ago," Durbin said. "Where people are being charged a reasonable amount at a reasonable tax wherever they make the purchase."