WASHINGTON — The Senate on Monday voted to begin debate on a bill — championed by U.S. Rep. Steve Womack, R-Rogers — that would require online merchants to collect sales tax receipts on Internet purchases.
The Senate voted, 74 to 20, in favor of taking up the "Marketplace Fairness Act," which was introduced by Sen. Mike Enzi, R-Wyo. Sens. Mark Pryor, D-Ark., and John Boozman, R-Ark., are among 28 co-sponsors.
Pryor and Boozman voted in favor of proceeding with the legislation.
Retailers now are required to collect sales taxes only in states where they have a physical presence. Consumers are technically required to remit the owed tax themselves but few do.
The bill would require companies to collect the tax unless their annual out-of-state revenue was less than $1 million.
Womack has introduced the same bill in the House where the Senate vote could help build support for similar action in the House.
Womack introduced a similar bill in the last Congress but was unable to get a floor vote in some measure because of opposition voiced by Grover Norquist, president of Americans for Tax Reform.
Norquist remains opposed to the bill, arguing that it is not about tax fairness but is "about taxing people who can’t vote against those imposing the sales tax rate."
Womack’s bill has 55 co-sponsors, including Reps. Rick Crawford, R-Jonesboro, and Tim Griffin, R-Little Rock. Rep. Tom Cotton, R-Dardanelle, has not co-sponsored the bill.
Proponents said that brick-and-mortar retailers are losing business to Internet retailers as consumers seek to dodge sales taxes that the "Main Street" stores are required to collect.
Beyond the free market arguments, proponents say the proposal would simply assist states and municipalities in collecting a tax that is already due.
In Arkansas and other states with a sales tax, individuals are required to pay "sales and use" tax on out-of-state purchases but a small fraction actually comply.
The Obama Administration issued a statement Monday in support of the legislation, saying it would eliminate an "unfair advantage" enjoyed by out-of-state online companies over local small businesses.
Senate opposition came largely from the five states with no sales tax: Oregon, Montana, New Hampshire, Delaware and Alaska.
"This is profoundly misguided legislation," said Sen. Ron Wyden, D-Oregon, who argued that it would give state governments a new revenue source from outside their own jurisdictions.
Sen. Kelly Ayotte, R-N.H., argued that the bill represents an onerous burden for Internet retailers who would become "the tax collectors for the nation."
Sen. Dick Durbin, D-Ill., spoke in favor of the bill, saying that retailers and governors from across the nation support the bill and that computer programs make it simple for Internet retailers to comply.
"Let us engage in this important debate," Durbin said.