PROVIDENCE — This may be the last Christmas shopping season when you can buy gifts online without paying a sales tax.
Legislation called the Marketplace Fairness Act, which would allow states to tax online and catalog purchases, even when the seller has no location or employees in their states, is making its way through the U.S. Congress.
The Senate passed the measure last May and it is now awaiting passage in the House of Representatives.
Under current law, a business must have some base of operation in a state — called a nexus — before it is required to assess sales tax on items it sells. Technically, buyers in Rhode Island are required to report the items they buy online or in another state and pay the sales tax to the state, but that law is seldom if ever enforced.
On Monday, members of Rhode Island’s congressional delegation were at the Greater Providence Chamber of Commerce to receive Hero of Main Street awards from the National Retail Foundation for co-sponsoring the bill. The award is going to all of the 69 senators and 67 representatives across the country who put their names on the bill.
If the House passes the act, Rep. David Cicilline told The Times Monday, the national system would allow states to impose their own sales taxes, but it would provide for the assessment and collection of the tax in a comprehensive way.
“It is important for our Main Streets and commercial districts,” Cicilline said. “They are not only employing Rhode Islanders, they are paying taxes to their local communities and they are at a competitive disadvantage when businesses are able to sell goods and are able to avoid the assessment of sales taxes.”
The bill, the 1st District congressman said, “will benefit jobs in Rhode Island, it will benefit small businesses owners and it will create an even playing field for retailers.”
Cicilline said he thinks it is appropriate for the taxman to reach into
“If sales taxes are designed to tax a sale, then it ought to tax sales
whenever they occur and you shouldn’t put retailers who are a critical
part of our state’s economy, at a disadvantage to the company that sells the same product but avoids paying taxes because it is done on the Internet. They should all be treated the same.”
Last week, the U.S. Supreme Court rejected an appeal by Amazon and other online retailers against a New York State law allowing state sales tax on online purchases, but Sen. Jack Reed says it would be better to have a uniform, nationwide system, rather than requiring sellers to comply with 50 different laws in the various states.
“That’s another reason why we have to pass the Marketplace Fairness Act,” Reed said, “because it would give legislative clarity – it would make it clear (what is required of sellers) and it would not depend on individual states and individual court opinions.
Reed pointed to a provision in the Rhode Island state budget under which the state’s 7 percent sales tax would automatically drop to 6.5 percent if the Marketplace Fairness Act becomes law.
“With modern technology, it becomes easy to collect the sales tax on the Internet,” Sen. Sheldon Whitehouse said. “You can solve the problem with pretty low hassle and there is a reason you want to solve the problem.
“We’ve heard from shoe stores that people come in and try on all the
shoes, find exactly which ones they want, and on the way out of the store they are ordering it on the Internet (on their smartphones). It is the shoe store owner who has to have the inventory, has to have the store on Main Street, has to have the knowledgeable staff, then doesn’t make the sale. There is a built-in advantage to the Internet, you don’t want to add to that by not having them pay their taxes.
“This is a way make sure the sales taxes which they owe actually get
collected. It is not a new tax, it’s just a collection of a liability they have.”
“In our technologically advanced society, online shopping is a wonderful option” 2nd District congressman James Langevin, who did not attend Monday’s ceremony, said in a written statement. “It is fast, easy and convenient, and has helped many businesses expand their operations and reach customers far outside their geographic area. However, convenience should not come at the cost of sustainability of small businesses that lack the resources to compete online. We need to level the playing field and support small businesses, which are the backbone of our economy.”
Follow Jim Baron on Twitter @Jim_Baron