It is clear that the permanent Internet Tax Freedom Act (ITFA) is running into some powerful pushback in the Senate, though whether it is enough to derail it is unclear.
A permanent ITFA was added to a trade bill (S. 644) conference report last week and passed by the House, but the bill has yet to receive a vote on the Senate floor.
Sen. Dick Durbin (D-Ill.) speaking on the floor during morning business speeches, said he was among a group of senators who would oppose passage of a permanent ITFA renewal until the House takes up, debates, and votes on, a version of the Marketplace Fairness Act (the Remote Transactions Parity Act) that would require online retailers to collect local sales and use taxes.
He did signal he could support a short-term ITFA extension—through September 2016.
He said he supported the merits of ITFA, but said it was grossly unfair to speed this thing through with an 'air drop' in a conference report without any hearing and to do it at the disadvantage of retailers and businesses across America.
Illinois is one of seven states that currently collect taxes on Internet access because they were grandfathered when a temporary bill passed in 1998. The permanent ITFA bill would sunset those taxes by 2020, which Durbin said would cost his state $390 million in taxes.
He said that it was not fair to eliminate those taxes without offsetting them by requiring online retailers to collect taxes from buyers, who he pointed out have to provide a zip code that makes it relatively easy to identify what taxes should be collected.
Durbin talked about the impact on small businesses of the 5%-10% price advantage online retailers who did not collect the taxes had. He also pointed to essentially flat brick-and-mortar sales over the Thanksgiving weekend versus a 30% increase in online sales. He also said that stores were simply becoming showrooms where people kicked the tires on the product and collected info, only never to be seen again as they bought the product online.
Durbin complained that House Judiciary leadership would not bring up a version of the Marketplace Fairness Act—it already passed the Senate two years ago—while slipping the permanent ITFA into the conference report on the trade bill.
Sen. Patrick Leahy (D-Vt.), ranking member of the Senate Judiciary Committee, seconded Durbin and said he strongly supported the online sales tax. Leahy said it was time to start "leveling the playing field" and "to worry as much about the citizens of our own communities as conglomerates no one ever sees."
