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posted: 5/14/2013 5:00 AM

Editorial: Internet sales taxes should be collected

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The Daily Herald Editorial Board

The addition of sales taxes onto the purchase price of products we buy is an accepted part of the transaction whenever an item is bought from a physical store.

But in the world of the Internet, the expectation has been that there are no added taxes. That's unfair to the businesses who do have to collect sales taxes and to state and local governments that rely heavily on those taxes.

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We support the U.S. Senate, which last week approved a bill that will make this situation right. The bill, co-sponsored by Illinois Democrat Dick Durbin, enjoyed bipartisan support, and we hope the same will be true in the House.

Durbin explained it well when he said, as quoted by Crain's Chicago Business last month; "How in the world can you expect the bricks-and-mortar businesses of America to compete with Internet competition when the bricks-and-mortar business has to collect sales tax and the Internet competitor does not? In my state, that's an 8 percent, 9 percent, 10 percent advantage, and it's shifting more sales on to the Internet and away from the local stores. I don't think that's fair. We're asking for a level playing field."

Detractors say this will be a burden on small Internet businesses. But the legislation as written exempts those businesses with less than $1 million in online sales. Opponents like eBay, which has fought the bill, suggests the exemptions should be for businesses with up to $10 million in sales and fewer than 50 employees.

We're sure there is room for even more compromise as the legislation, dubbed the Marketplace Fairness Act, moves to the House. It faces an uncertain future, as some Republicans view this as an added tax.

But this is not a new tax. Consumers just aren't accustomed to paying it. In Illinois, in fact, consumers are supposed to pay the tax or declare it on their tax forms, a step most don't take.

Given that Internet sales increased nearly 16 percent in 2012 to a total of $226 billion, this is an issue that needs to be resolved now. The Associated Press reports that states lost a total of $23 billion last year in sales taxes, according to a study done for the National Conference of State Legislatures. Half of that was lost from Internet sales, and half from purchases made through catalogs, mail orders and telephone orders.

Given the financial constraints Illinois and our local communities are in, that's just too much money left on the table.

"The time has come and technology has advanced sufficiently to require compliance from online businesses. If they can use our interstate commerce system to sell goods in our community, they shouldn't be allowed to legally use tax avoidance as a business strategy," said Katie Wood, executive director of the Downtown Naperville Alliance.

We urge the suburban delegation in the House to right this inequity and vote yes when this bill comes up for a vote.

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