WASHINGTON -- The Senate sided with traditional retailers and financially strapped state and local governments Monday by passing a bill that would widely subject online shopping -- for many a largely tax-free frontier -- to state sales taxes.
The Senate passed the bill by a vote of 69 to 27, getting support from Republicans and Democrats alike. But opposition from some conservatives who view it as a tax increase will make it a tougher sell in the House. President Barack Obama has conveyed his support for the measure.
Under current law, states can only require retailers to collect sales taxes if the store has a physical presence in the state.
That means big retailers with stores all over the country like Wal-Mart, Best Buy and Target collect sales taxes when they sell goods over the Internet. But online retailers like eBay and Amazon don't have to collect sales taxes, except in states where they have offices or distribution centers.
As a result, many online sales are tax-free, giving Internet retailers an advantage over brick-and-mortar stores.
The bill would empower states to require businesses to collect taxes for products they sell on the Internet, in catalogs and through radio and TV ads. Under the legislation, the sales taxes would be sent to the state where the shopper lives.
Supporters say the current tax disparity is turning some traditional stores into showrooms, where shoppers pick out items they like, then buy them on the Internet to avoid sales taxes.
Internet giant eBay is leading the fight against the bill, along with lawmakers from states with no sales tax and several prominent anti-tax groups. The bill's opponents say it would put an expensive obligation on small businesses because they are not as equipped as national merchandisers to collect and remit sales taxes at the multitude of state rates.