Internet sales tax fight hits Congress

WASHINGTON, Nov. 2 (UPI) -- Supporters and opponents of collecting sales taxes for online transactions are lining up U.S. congressional backing for their positions, officials say.

Retailers now are pressuring the congressional supercommittee -- tasked with reducing the federal deficit by $1.2 trillion during the next decade -- to include language based on an online sales tax bill Sen. Rick Durbin, D-Mich., introduced during the summer, Roll Call reported Wednesday.

Durbin has been working with Republican Sens. Lamar Alexander of Tennessee and Mike Enzi of Wyoming on bipartisan legislation that would allow states to collect sales tax on Internet transactions.

Currently a state cannot force an out-of-state Internet entity to collect and pay the sales tax the state's residents are required to pay on purchases made in brick-and-mortar stores.

Opponents -- notably online auctioneer eBay -- have their own congressional supporters. Sens. Ron Wyden, D-Ore., and Kelly Ayotte, R-N.H., are getting ready to introduce a non-binding measure that would to protect small Net businesses from any new tax scheme.

The Wyden-Ayotte legislation would affirm that federal legislation should not grant states authority to impose new tax collecting requirements on small Internet businesses and entrepreneurs, Roll Call said.

While the sales tax proposals wouldn't help the Joint Committee on Deficit Reduction add to the federal treasury, supporters say the additional state sales tax revenue could help ease the effect of cuts on already cash-strapped state budgets.

"Whatever the supercommittee does, the states are going to be adversely impacted. It's our best argument," David French, chief lobbyist for the National Retail Federation, told Roll Call. "This is not inherently something the supercommittee is going to want to do by themselves."

Durbin dismissed the idea that the supercommittee would take up the measure.

"You guys think the supercommittee is doing everything," he told Roll Call.

The National Retail Federation has spent about $3.4 million on lobbying so far this year and the Retail Industry Leaders Association has spent $2.6 million, lobbying disclosure reports indicted.

Opposition has come from anti-tax advocates and large Internet retailers such as eBay, which has spent about $2.7 million on lobbying activities in the past year.