Lawmakers Explore Taxing Internet Sales

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(Host) The House Ways and Means committee is taking a serious look at ways to collect the state sales tax from large Internet companies.  It’s estimated that Vermont is losing between 30 and 40 million dollars a year in revenue because most online purchases are tax free.

But as VPR’s Bob Kinzel reports, finding an approach that meets legal requirements isn’t going to be easy.

(Kinzel) Here’s the big legal problem facing states that want to impose their sales tax on large Internet companies, like  The U.S. Supreme Court has ruled that states can take this step only if the Internet company has a physical presence in the state.

House Ways and Means chairwoman Janet Ancel says a number of states are now trying to redefine what "physical presence" actually means, and in some cases, the issue has ended up in court.

(Ancel) "We know we’re losing probably tens of millions of dollars in Internet sales and what we’re doing is we’re looking at what other states have done some states have moved more aggressively and they’ve had some negative consequences in their states."

(Kinzel) Ancel says there’s a lot of support on her committee to move forward on this issue.

(Ancel) "We think this is sales tax that’s due and we would like to find a way to collect it but it’s a legal challenge to figure out the right way to do it."

(Kinzel) Tasha Wallis is the executive director of the Vermont Retail Association. She likes the bill:

(Wallis) "It’s a tax fairness question but it’s really about retailers in Vermont and an unfair advantage by these large on line sellers who do not collect sales tax, so there’s really not a level playing field."

(Kinzel) And Wallis says there’s no question that Vermont retailers are being hurt by the current situation.

(Wallis) "Many small retailers find customers coming into the store checking out products getting a lot of information from the seller and then the customer says thank you very much I’m going home to buy this item on line."

(Kinzel) Lamoille senator Rich Westman has introduced a companion bill in the Senate. He says it’s a way to help local communities.

(Westman) "If you have a bookstore in Vermont where they own the building, they pay property tax they pay income tax and they pay sales tax and how is it fair to let an Internet company sell books here and not pay anything."

(Kinzel) Westman says Vermont could avoid its legal problems if Congress authorized states to impose this tax.

(Westman) "Vermont presently already has laws on the books through the uniform sales tax that if Congress would approve what we’ve passed and what 30 some other states have passed they would be remitting the sales tax already."

(Kinzel) Congressman Peter Welch has sponsored this legislation in Washington but the future of the bill is uncertain at this time.

For VPR News, I’m Bob Kinzel in Montpelier.

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