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October 18, 2011

E-commerce raises question of sales tax fairness

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NORMAL, Ill. —

In July, Durbin filed federal legislation to compel online retailers to start collecting sales taxes. Dubbed the Main Street Fairness Act, it creates a national framework for simplifying and streamlining a sales tax system complicated by the various tax jurisdictions.

In October, Reps. Jackie Speier, D-Calif., and Steve Womack, R-Ark., filed a similar bill in the House, calling it the Marketplace Equity Act. It gives the states more flexibility than Durbin’s proposal in setting up a collection and enforcement structure.

Back in middle-America Normal, where one-third of the town budget is funded with sales tax receipts, Mayor Chris Koos feels the crunch of eroding revenue. He said sales tax receipts there are down about 40 percent.

“We're on a bare-bones budget as it,” said Koos. “But I have citizens asking me all the time: ‘Why can't the town provide more services’?”

Durbin traveled to Normal recently for a press conference where Smith, a self-described “small government Republican,” declared his support for the Democrat's big-government solution.

“I don't like the federal government telling business what to do, but right now we've got a tax code that's creating winners and losers,” Smith said. “All I want is a level playing field.”

The big online retailers argue they're not standing in the way.

Amazon, the e-commerce behemoth with $35 billion in sales last year, has offered conditional support for Durbin's bill while locked in battle with a handful of states that have passed laws requiring online businesses to collect and remit sales taxes.

But Amazon also disputes the notion that no-tax sales give it a competitive edge.

The company cites studies like the one released in July by Chicago investment firm William Blair & Co. It found Amazon's prices are 5 percent to 6 percent less than store prices, even when the sales tax is added. “As analysts have noted, we offer our customers the lowest prices regardless of whether the sales tax is charged,” Amazon spokeswoman Mary Osako said.

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