In a bipartisan vote on March 7, the U.S. Senate handily passed a bill requiring web retailers and out-of-state catalog companies to collect state sales taxes.
But the bill Wednesday faltered in the House after Robert Goodlatte, chairman of the House Judiciary Committee, said it "suffers from fundamental defects.” He and fellow Republicans have said they're concerned that the bill could trigger aggressive tax collection measures and audits.
The issue has been a thorn in the side of brick-and-mortar retailers, who must collect state taxes in their online commerce as well as in stores, and are thus at a financial disadvantage compared to the likes of amazon.com and other web-only retailers.
The National Retail Federation supports the bill.
When looked at plainly, the online sales tax issue is a bit of a head-scratcher. If collecting sales taxes is good enough for brick-and-mortar retailers, including for their e-commerce, then surely it should be good enough for e-retailers. But if requiring the collection of sales tax is no good, then perhaps retailers with physical stores should also be exempt. That, however, would be a horror for states, which are losing $23 billion a year in uncollected taxes from e-commerce. The issue is oh-so-slowly becoming moot, as even Amazon now collects taxes in 20 states, something that will continue to expand as it opens warehouse operations in more states. For now, though, the anti-tax sentiment in the House of Representatives looks like it will stop this sales tax fairness effort cold.