A plan called the "Main Street Fairness Act," proposed by U.S. Sen.
Dick Durbin, D-Ill., would create a national law that forces online
retailers to start collecting sales taxes on purchases made over the
Internet. Amounts would be based on each state's existing sales tax
"It is not only a confusing situation, Internet sales are
firmly established across the United States. States, counties,
cities are losing substantial amounts of revenue because of the
current system," Durbin said.
Illinois sales tax rates are separated into three categories:
food and prescriptions, 1 percent; vehicles, 6.25 percent; and other
general merchandise, 6.25 percent. Local communities also can create
Durbin estimates that states could be losing a total $37 billion
every year on purchases made through online retailers, with Illinois
losing about $153 million.
"It's one of those things unreported. We're not sure what we're
missing. I think it's going to be a minimum of over $100 million a
year," Durbin said.
A 1992 Supreme Court case ruled that only retailers with a
physical presence in the state had to collect sales tax.
In March, Gov. Pat Quinn signed Illinois' first online sales tax
law, extending a company's physical presence to their online
affiliates with offices in the state, thereby requiring them to
collect sales tax and submit it to the state. As a result, major
online retailers, such as Amazon.com, dropped their affiliates.
Brent Shelton, spokesman for Fat Wallet, an affiliate of
Amazon.com and eBay.com, said the company moved to neighboring
Wisconsin to avoid being dropped as an Amazon affiliate. He said the
effect of the proposed federal law on Fat Wallet largely depended on
how its partners react.
"It wouldn't surprise me if some of the merchants aren't exactly
for (it)," Shelton said.
Fat Wallet offers coupons to shoppers through affiliate
partnerships with online retailers such as Amazon and eBay.
Brian Bieron, a lobbyist at eBay, said it was unfair to pit giant
retailers that have actual stores and already have to collect sales
taxes against the smaller businesses that don't.
"Forcing small businesses to take on the same costs and tax
burdens as national retail businesses is unrealistic, unfair and
will unbalance the playing field between giant retailers and small
business retailers on the Internet," Bieron said in a written
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Smaller brick-and-mortar stores, however, say the new state law
-- and the proposed federal initiative -- will make it easier to
"We know it's a competitive environment. We have to compete to be
viable, but we should be on a level playing field with our online
sellers," said Bob Thompson, owner of BikeTek, a bicycle shop in
Lam Sargis, owner of Springfield Running Center, an athletic
apparel and shoe store in Springfield, said he's had customers come
into his store asking him to match prices they found online without
the sales tax.
"Even though we give a little bit of a discount to locals, we
cannot match the discounts given by the big companies that don't
have the bricks and mortar," Sargis said.
But not all small-business owners agree.
Brandi Tolley, who runs a men's apparel eBay store, called the
measure a "desperate" way for states to pull in revenue. Her store
earns about $35,000 in sales annually, she said.
"A lot of us are small businesses. We don't have huge
brick-and-mortar stores. We're just tiny businesses trying to make
it," Tolley said.
"Is (being online) an advantage? Sure. But (stores) have that
same opportunity. They could certainly shut down that
brick-and-mortar and sell to people all over the world, just like
the rest of us do," Tolley added.
Illinois shoppers are required by law to self-report sales taxes
for online purchases that aren't collected by the retailer. The
Illinois law and federal proposal would shift that responsibility
from the customers to the retailers.
Self-reporting "creates a system which is very hard to administer
across the United States, when it's up to the consumer to
voluntarily step forward and declare that they owe sales tax in a
given place," Durbin said.
Durbin expects to introduce the legislation by next month.
Statehouse News; By MELISSA LEU]