For states struggling in the troubled economy, this could mean $23 billion in new revenue each year, according to the National Conference of State Legislatures. Had online retailers collected sales tax this year, Virginia would have added nearly $423 million to its coffers, while Maryland would have seen $376 million and the District $72 million, the group said.
The movement in state capitals is driving newfound support for a proposed bill in Congress that could make collection of sales tax a standard practice on the Web, no matter where a consumer logs in to shop.
Bricks-and-mortar retailers are cheering the moves. For years, their online rivals have resisted charging sales tax, giving them a price advantage. They have cited a 1992 Supreme Court ruling that let online companies off the hook if they didn’t have a physical presence in the state where the customer lived.
A Web trade association that includes eBay, Overstock.com and Facebook is fighting the new bills. But notably, Amazon.com appears to have waved the white flag and supports the sales tax measures. Some analysts said they observe a shift by the online retailing leader that could lead to a fundamental change to the rapidly growing e-commerce business.
Technically, when consumers shop online, they are supposed to pay sales tax by reporting it on their state tax returns. But as it turns out, Americans aren’t always honest when it comes to paying their taxes.
For that reason, traditional retailers say their online counterparts should collect sales tax when a consumer makes a purchase.
Prices are so low online that retailers have long decried what they call the “showrooming” effect. Customers visit shops, try out different products and then buy them cheaper online, sometimes on their smartphone while they are still standing in the store.
“You’ve been doing all of the work and then the online competitor steals the sale,” said David French, senior vice president of government relations at the National Retail Federation, a trade group.
Online shopping has shown no signs of slowing down. Last year, it generated $200 billion in revenue. In the first three months of this year, e-commerce jumped by 15 percent over the first quarter of 2011. Meanwhile, total retail sales grew 6 percent over the same period, according to the Commerce Department.
“All retailers want is a level playing field,” said Jason Brewer, vice president of communications and advocacy at the Retail Industry Leaders Association, an Arlington County-based trade group.
Hungry for revenue
After the recession, states had to find a way to plug holes in their budgets. It was impossible to ignore taxes that were already owed to them by law.