Welch advocates sales tax for online retailers
BENNINGTON -- Vermont Rep. Peter Welch used Cyber Monday, the busiest online shopping day of the year, to once again call for legislation that would require online retailers to collect sales tax.
Welch, a Democrat re-elected earlier this year to a fourth term, called on Congress Monday to pass legislation he has sponsored that would "level the playing field between Main Street retailers."
Americans were expected to spend about $2 billion Monday in online sales. Many of the sales will be tax free, however.
Welch said his Main Street Fairness Act would help simplify the collection of sales taxes on online purchases so brick-and-mortar and online retailers would all collect the same taxes. Currently, Internet retailers are only required to collect sales taxes in states where they also have a physical location. Welch said that puts local retailers at a competitive disadvantage because they are required to collect sales taxes at the point of sale. Out-of-state retailers, however, including many large online and catalog retailers, can provide customers with a "discount" by collecting no state or local sales taxes.
"Online sales are here to stay and they are a real convenience. But, if there is a sales tax on the product and you require the brick-and-mortar store to collect but not the online retailer, that's obviously not fair," Welch said in a telephone interview.
Out-of-state, online retailers are not currently required to collect sales taxes but consumers are required to report sales taxes owed on online purchases on annual tax returns. Welch said that reporting requirement is ill-conceived and not followed.
"Nobody ever does that and it's really impossible to do," he said.
Welch said he wants Congress to act during the lame duck session. And, he said there's more reason to be optimistic that it could pass. He said the bill is "consistent with the discussions we're having about a budget resolution." Additionally, there is growing support among Republicans about the idea.
"That gives us a shot. Uphill, but it gives us a shot," Welch said.
Former Mississippi Republican Gov. Haley Barbour is "a public advocate" for the bill, Welch said. And the discussion in Washington about taxes is shifting, he said.
"The opposition was that many of my Republican colleagues treated this as though it was a new tax. And the doctrine, of course, was to oppose any new tax," Welch said. "But, they've got merchants as constituents, too. I'm impressed with the growing support I'm getting from my Republican colleagues."
"The word tax just has been an obstacle and it's prevented people from stepping back and looking at it the way it should be viewed," Welch added.
The legislation would simply require online retailers like Amazon to collect sales tax and remit it to the state or district where products are purchased. Welch said lawmakers are looking to make it simple for large retailers, and protect small businesses that sell few goods online. There could be uniform software for everyone, or exemptions for small businesses, Welch said.
"Our goal here is to establish fairness, but also to have a practical way of protecting our small online retailers," he said.
Local retailers say the bill could help them, but there are bigger factors that drive consumers to online giants like Amazon. Sue Congdon, owner of Star Electric on Main Street in Bennington, said free shipping has hurt her business the most.
"I find a lot of people go online to do research and then they come in and look at it," she said. "Have lost some business? Probably. How much I don't know."
Still, Congdon said forcing online retailers to charge sales tax would likely help some. "I think it would be great. I really do. But, you're going to have a lot of people fighting it."
Rick Havlak, owner of the Bennington Bookshop, also on Main Street, said there is not a huge sales tax cost on small-ticket items such as books. Shoppers are choosing Amazon and Barnes and Noble for the convenience of shopping from home and free shipping. But he, too, said the bill should be passed to help cash-strapped states collect.
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