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Article updated: 3/27/2013 1:57 PM

Naperville chamber keeping close tabs on Internet sales tax amendment

By Justin Kmitch

The Naperville Area Chamber of Commerce claimed a small victory for local retailers this week after gaining some legislative support for collecting online sales taxes.

The U.S. Senate late Friday voted 75-24 in favor of a nonbinding measure that supports giving states more power to collect existing sales taxes on purchases their residents make from out-of-state Internet companies.

The legislation would exempt small businesses that earn less than $1 million annually from out-of-state sales taxes.

The Naperville chamber has had the ear of Democrat Sen. Dick Durbin and other lawmakers for a few years on the issue. Members were pleased to see the issue gaining some momentum.

"First and foremost, we thank Sen. Durbin for his leadership on removing this unwise tax loophole," chamber President and CEO Mike Evans said. "Only congressional action can modernize the tax code to ensure an outdated exemption doesn't make online-only retailers winners, and put a disincentive on the backs of retailers."

Because of the way the amendment was offered during the budget process, it was not binding and the legislation still must be brought up again.

"We believe it is a tax that is owed already and revenue that is supposed to have been collected. And for the state of Illinois, it's as much as $400 million," Evans said. "When you live in Illinois and have substantial budget issues and we're leaving that kind of money on the table, that has to beg the question of 'What is truly fair?'"

Under current law, states can only collect sales taxes from retailers that have a physical presence in their state. People who order items online from another state are supposed to declare the purchases on their tax forms, but few do.

"We don't believe an Internet sales tax is going to dictate consumer behavior. It's there. You're not going to chase people back into the stores by taxing Internet commerce," Evans said. "The brick-and-mortar retailers still need to improve the competitive nature of how they do business."

Evans and others said the amendment's passage and margin of victory gives them hope a binding measure could be in play later this year.

U.S. Rep. Peter Roskam of Wheaton met with Evans and other chamber leaders Friday, however, and said passing such a measure could be an uphill climb.

"If you put a bill on the floor today that in any way, shape or form feels like an Internet tax, it's not going to pass. So the only way to deal with this issue is within the totality of a larger tax reform effort," Roskam said. "If you were to go out with me on Sleight Street or Loomis and knock on the door and tell voters you're proposing a tax on purchases they bought on the Internet, you know, 3,2,1, ka-boom!"

Friday's vote was on an amendment to the 2014 budget the Senate was debating.

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