The chairman of the House Ways and Means Committee has cleared the way for consideration of a bill that would end the sales-tax-free status of television shopping clubs and some other mail-order merchandise, Rep. Byron Dorgan said yesterday.
The North Dakota Democrat, chief sponsor of the legislation, said committee Chairman Dan Rostenkowski (D-Ill.) has agreed that the panel will begin writing its version of the bill within the next 90 days.
"We have a good opportunity to get it passed in the next six months," Dorgan told a news conference. He emphasized that the bill would not impose a new tax but would simply give the states authority to collect taxes already owed.
The proposal would cost mail-order customers -- and enrich state coffers by -- about $1.5 billion a year, according to estimates by the Advisory Commission on Intergovernmental Relations. Revenue would range from nearly $5 million a year in Wyoming to about $209 million in California. The annual loss of tax dollars on mail-order sales for the District of Columbia is $7.6 million, for Maryland $35.4 million and for Virginia $36.8 million, the commission estimated.
The bill would overturn a 1967 Supreme Court ruling that severely restricted the ability of states to collect sales taxes from out-of-state sellers. An out-of-state retailer may not be required to collect taxes unless it has a business presence in the state -- and merely sending catalogues or delivering products into the state is not enough to establish that presence, the court held.
Giant catalogue operations, such as Sears, Roebuck & Co. and J.C. Penney Co., were not affected by the ruling because they also operate retail outlets in every state. But it did permit such well-known catalogue outlets as L.L. Bean of Freeport, Maine, to ship merchandise into every other state without requiring customers in those states to pay sales taxes.
In fact, such customers technically are liable for a use tax in most states, but almost no effort is made to collect it.
Several business groups support the measure, arguing that mail-order merchants have an unfair advantage because they can sell tax-free.
"That price advantage for direct sellers can reach 8 or 9 percent," depending on state and local tax rates, Dorgan said.
Although the inequity created by the Supreme Court ruling is 20 years old, the problem has grown in the past few years because of the proliferation of mail-order catalogues, toll-free telephone service and television shopping clubs, Dorgan said.
Dorgan's bill would exempt firms with less than $5 million in annual sales