Senate passes internet sales tax bill amid opposition from conservatives

Bill to overturn 1992 court decision has support of Obama, Amazon and Walmart – but its future in the House is uncertain

An Amazon employee grabs boxes off the conveyor belt

A 1992 supreme court ruling that said a state could not force a retailer to collect sales tax unless the retailer had a physical presence in the state. Photo: Scott Sady/AP

The US Senate on Monday passed a bill aimed at ending tax-free shopping on the internet but the move looks set to face fierce opposition before it becomes law.

The Marketplace Fairness Act, which has cross-party supporter and the backing of powerful retailers, would give states the power to require retailers with sales over $1m to collect state and local sales taxes for online purchases.

The bill has the support of president Barack Obama the majority of senators including Republican John McCain but Marco Rubio, seen a potential Republican presidential hopeful, and Rand Paul both voted against the bill.

The bill passed the Senate by 70 votes to 24 but faces a second test in the House of Representatives where internet retailers and conservatives are already lobbying against the tax. House leaders have yet to schedule hearings or votes on their version of the measure.

The legislation would overturn a 1992 supreme court ruling that said a state could not force a retailer to collect sales tax unless the retailer had a physical presence in the state.

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Senate passes Internet sales tax bill; House fate uncertain

WASHINGTON — The Senate voted 69-27 Monday to approve legislation that would allow states to force larger online retailers to collect sales taxes.

But the bill faces an uncertain future in the House as lawmakers, particularly Republicans, wrestle with whether the Marketplace Fairness Act amounts to a tax increase.

The Market Place Fairness Act would give states the authority to force larger retailers to collect sales taxes that residents already are obligated to pay. But with most consumers dodging those taxes for years, the result will be that people will pay more in taxes.

For influential activist Grover Norquist of Americans for Tax Reform, which asks lawmakers to sign a no-new-tax pledge, the so-called Marketplace Fairness Act is, in effect, a tax increase.

And his group, along with some other conservative activists, is pushing House members to reject it.

Quiz: How much do you know about Internet sales taxes?

But some Republicans have pushed back, saying the bill raises no new taxes and just helps level the playing field between online and traditional bricks-and-mortar retailers.

Two of the leading Senate supporters were Repubilcans — Mike Enzi of Wyoming and Lamar Alexander of Tennesssee. And the bill passed the Senate with strong bipartisan support.

Rep. Steve Womack (R-Ark.) is the main House sponsor and is hopeful the chamber will pass the bill.

But House leaders have not committed to taking up the legislation, saying it would first go to the House Judiciary Committee.

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