Online Businesses Say Tax Bill Would Hurt Sales

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Last week, the House passed an Internet sales tax bill that, in theory, would force out-of-state Internet giants like and to collect sales taxes on the products they sell to Vermonters.

The two-page bill, H.143, passed on third reading Thursday, and on Friday morning the Senate sent the legislation to its Finance Committee. An identical piece of legislation, S.54, introduced by two unlikely comrades in arms – conservative Sen. Rich Westman, R-Cambridge, and ultra-liberal Sen. Tim Ashe, D/P-Burlington, is also in play.

The legislation, in other words, is on a trajectory toward enactment.

On the face of it, the bill seems like the perfect, no-political-will-required piece of legislation: After all, it targets monolithic, out-of-state corporations. Plus, it could generate $30 million to $40 million in much-needed state revenue — that is, if the Tax Department actually received sales taxes collected by these companies.

Like consumers in most states, Vermont’s residents are supposed to voluntarily pay a 6 percent sales tax on online purchases when they file annual income tax forms with the state Tax Department. In practice, however, the honor system hasn’t been particularly effective.

Meanwhile, brick-and-mortar stores are required to collect the tax on behalf of the state. Rep. Jeff Wilson, sponsor of H.143, says charging Internet retailers the same tax is a way of leveling the playing field.

Don’t be surprised, though, if the Vermont legislation hits a roadblock once it’s taken up by the Senate Finance Committee. A rallying cry has already gone up: Local bloggers and in-state retailers affiliated with Internet sellers, large and small, would be hurt by the new provision, and they’re organizing a campaign to fight the proposal. 

If H.143 or S.54 becomes law the tax would go into effect in July 2012, but some Vermont Internet retailers and bloggers say and the other large companies they work with will pull out of the state immediately, and they would, as a result, either go out of business or lose a significant portion of their income.

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