Tax-free Internet shopping in jeopardy

WASHINGTON — A bill to require Internet shoppers to pay sales taxes for online purchases may be cruising through the Senate, but it soon will hit a roadblock in the House.

“There’s a lot of political difficulty getting through the fog of it looking like a tax increase,” said Rep. Steve Womack, R-Ark., one of the main sponsors of the bill in the House.

The bill would empower states to reach outside their borders and compel online retailers to collect state and local sales taxes for purchases made over the Internet. Under the bill, the sales taxes would be sent to the states where a shopper lives.

States now can only require stores to collect sales taxes if the store has a physical presence in the state. As a result, many online sales are tax-free, giving Internet retailers an advantage over brick-and-mortar stores.

Womack said the bill is not a tax increase. He said it simply gives states a mechanism to enforce current taxes.

In many states, shoppers are required to pay unpaid sales taxes when they file state tax returns. But governors complain that few people comply.

The Senate voted 63-30 Thursday to end debate on the bill, though senators delayed a final vote on passage until May 6, when they return from a weeklong vacation.

President Barack Obama supports the bill.

Senate Democratic leaders wanted to finish work on the bill this week before leaving town for the recess. But they were blocked by a handful of senators from states without sales taxes. Oregon, Montana, New Hampshire and Delaware have no sales taxes, but the two senators from Delaware support the bill.

Supporters say the bill is about fairness for local businesses that already collect sales taxes and for states that lose revenue. Opponents say the bill would impose complicated regulations on retailers and doesn’t have enough protections for small businesses. Businesses with less than $1 million a year in online sales would be exempt.