Internet sales tax clears hurdle and other online retailers would have to collect sales taxes under a bill now in the Senate. and other online retailers would have to collect sales taxes under a bill now in the Senate. (AP, File)
Posted: April 26, 2013

WASHINGTON - The Senate moved closer Thursday to passing a bill to tax purchases made over the Internet, but a final vote was delayed until members return from a weeklong vacation.

Although opponents hope senators will hear from angry constituents over the next week, they have a steep hill to climb to defeat the bill.

The Senate voted, 63-30, to end debate, setting up the final vote May 6. That vote will require only a majority, so 14 supporters would have to flip to stop it.

President Obama supports the bill, but it faces an uncertain fate in the House, where some Republicans consider it a tax increase.

The measure would empower states to require online retailers to collect state and local sales taxes for purchases made over the Internet. Under its provisions, the sales taxes would be sent to the states where a shopper lives.

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

Retailers who have lobbied in favor of the bill celebrated Thursday's vote.

"The special treatment of big online businesses at the expense of retailers on Main Street will soon be a thing of the past," said Bill Hughes of the Retail Industry Leaders Association. "The overwhelmingly bipartisan support for leveling the playing field is rare in today's political environment and paves the way for a level playing field once and for all."

A handful of senators from states without sales taxes opposed the bill, with Sen. Ron Wyden (D., Ore.) leading the fight against it. Oregon, Montana, New Hampshire, and Delaware have no sales taxes, though the two senators from Delaware support the bill.

"It's coercive. It requires a number of states to collect the taxes of other states thousands of miles away against their will," Wyden said in an interview. "It's discrimination because this forces some people online to carry out responsibilities that brick-and-mortar retailers do not have to do."

Wyden said the bill also gives an advantage to foreign retailers. Supporters say the bill treats foreign retailers the same as domestic ones, but opponents question the ability of states to enforce state tax laws on companies based in other countries.

Supporters say the bill is about fairness for local businesses already collecting sales taxes and claiming lost revenue for states.

Opponents say that the bill would impose complicated regulations on retailers and that it doesn't have enough protections for small businesses. Businesses with less than $1 million a year in online sales would be exempt.

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