Push to Require Online Sales Tax Divides the G.O.P.

From The New York Times:

Legislation that would force Internet retailers to collect sales taxes from their customers has put antitax and small-government activists like Grover Norquist’s Americans for Tax Reform and the Heritage Foundation in an unusual position: they’re losing.

For years, conservative Republican lawmakers have been influenced heavily by the antitax activists in Washington, who have dictated outcomes and become the arbiters of what is and is not a tax increase. But on the question of Internet taxation, their voices have begun to be drowned out by the pleas of struggling retailers back home who complain that their online competitors enjoy an unfair price advantage [and Sid adds, local governments and school districts who lose sales taxes from online purchasaes].

 

The Marketplace Fairness Act would allow state governments to force Internet retailers to collect sales taxes from their customers and remit the proceeds to state and local governments, just as brick-and-mortar retailers have done for decades. The states would be required to provide free software that would be embedded in retail Web sites to do the calculations.

 

Mr. Norquist, whose organization maintains the antitax pledge that virtually every Republican in Washington has signed, calls it the “Let People in Alabama Loot People in New York Act.” To him, the bill is a money grab by cash-poor state and local governments that would get the power to tax consumers who do not have the power to vote them out of office.

 

Supporters of the bill . . . argue that the bill, which could generate as much as $24 billion in new tax revenues, is not a tax increase at all. It only ensures that taxes already owed are actually paid. Most states collect 4 to 7 percent on retail purchases.

 

The real pull has come from personal experiences back home, and the emergence of reliable Republican business voices who have provided a rare counterargument to the activists in Washington. [Amen on that statement.]

 

For Senator Roy Blunt of Missouri, it is a bridal shop in St. Louis where customers try on dresses, check the labels for the product code, and then order the same product online, free of sales tax.
 

For Representative Austin Scott, an ardent conservative Republican from Georgia, it’s Ken’s Trading Company, where the profit margin on a Leupold rifle scope is lower than the sales tax too many Georgians are avoiding by shopping for the same scope on their computers.

“We respect their opinion. I’m glad they’re there as conservatives,” Mr. Scott said of the antitax groups. “But the fact of matter is, in the end we have a job to do.”
 

For opponents of the bill, the impotence of the antitax arguments has been a revelation.
 

Mr. Norquist and other conservatives are not mincing words. Heritage Action predicted that the Internet bill would usher in “tax audits from hell” for online retailers who could be subject to scrutiny from taxing authorities all over the country at year’s end.

 

The Heritage Foundation e-mailed to members its 10 reasons to oppose the bill, contending “it will hobble the Internet economy,” erode “state sovereignty,” force “small businesses to become tax collectors for other states” and unleash “all the nation’s tax collectors on small businesses.”
 

Mr. Blunt grimaced at such assertions and recalled an interview he did with a television reporter in St. Louis. After the cameras were turned off, the reporter told him of his wife’s friend and her bridal store — which for many customers has turned into a showroom to try out the wares before buying them online.
 

“They use the parking lot. They use the sidewalk. They benefit from police protection, and then the local merchant who pays for all of that doesn’t get the sale,” he said, suggesting that the groups’ angry opposition in Washington could prove to be something of a watershed with Republicans.
 

Mr. Scott said he was in no way ready to renounce his support of the taxpayer pledge, but on this one, he has made his choice: “I’m a co-signer of the pledge. I’m a co-signer of the legislation. We have to collect the taxes that are due.”