WEST WARWICK – If you are thinking of making a big-ticket purchase online in hopes of evading sales tax, you might want to hurry.
Just hours after Sen. Jack Reed and Gov. Lincoln Chafee held a press conference Monday morning to promote legislation that would require “remote sellers” – Internet and catalog retailers – to collect sales taxes for the states where their purchasers live, the U.S. Senate voted 74-20 to pass a procedural motion to go ahead with debate on the legislation.
Current law already requires purchasers to declare and pay sales and use taxes on items bought in other states or online – a law honored more in the breach than the observance – but it does not require the sellers to collect the tax and remit it to the appropriate state.
According to Reed spokesman Chip Unruh, the measure – called the Marketplace Fairness Act — is now subject to 30 hours of legislative debate over the next several days and there will be attempts to amend it. If it is approved by the Senate, it will go to the House where prospects for its passage are less clear.
Joining Reed and Chafee for the event were two-thirds of the seemingly ubiquitous Nirope – brothers Ron and Peter Cardi of Cardi’s Furniture. The press conference was held at Cardi’s West Warwick store.
Reed said brick-and-mortar stores like Cardi’s “are facing an unfair and unlevel playing field. They charge sales tax. There are many Internet providers who do not charge sales tax.
“As a result of this loophole, they are facing unfair competition, frankly,” Reed said of what he called “Main Street stores.” He said those stores also provide jobs to Rhode Islanders and will allow Rhode Island to collect about $29 million in sales taxes it is currently losing. Cardi told reporters that the amount of lost taxes to the state could be much higher, perhaps $70 million.
Both Reed and Peter Cardi described a situation in which shoppers would go to a store like Cardi’s check out the merchandise and get information from store employees, then they would go online to another retailer to purchase the goods without paying the sales tax. Cardi said some shoppers would have furniture delivered, try it for a few days or a week, and then take advantage of Cardi’s return policy to send it back and buy the same merchandise online, often for no other reason than to avoid paying sales tax.
Chafee told reporters he supported similar legislation when he was in the U.S. Senate, and it was one of his first priorities when he was elected governor and worked with colleagues from other states at national governors’ conferences.
If the bill does pass Congress and is signed into law by President Barack Obama before July 1, there is a provision in the current year’s budget that would automatically reduce Rhode Island’s sales tax from 7 percent to 6.5 percent, Chafee said. If the federal law does not pass by that date, he said, new state legislation would be required.
“We’re not going to go out and spend that windfall,” Chafee said, “we are going to lower the sales tax to keep us more and more competitive.”
The governor also noted that stores such as Cardi’s also pay property taxes on their land and buildings, which helps cities and towns.
The Obama administration issued a statement later Monday that said the bill “will level the playing field for local small business retailers that are in competition every day with large out-of-state online companies. Because these out-of-state companies are able to play by a different set of rules, this disparity undermines the ability of cities and States to invest in K-12 education, police and fire protection, access to affordable health care, and funding for roads and bridges.”