Governors plead for urgent online sales tax authority

WASHINGTON (Reuters) - Governors are urgently pressing Congress to pass Internet sales tax legislation in the coming weeks, saying states cannot afford to wait to collect billions of dollars from online retailers.

Washington state Governor Chris Gregoire, a Democrat, and Tennessee Governor Bill Haslam, a Republican, wrote to Senate leaders on Tuesday urging them to pass legislation granting states the authority to collect sales taxes from online businesses. The letter was released on Wednesday.

They said the changes should be made this year and not be wrapped into "wide-ranging, comprehensive tax reform" in 2013.

Legislation requiring online retailers to collect and remit sales taxes to states has languished in the Senate and House of Representatives for years, but the issue has grown more pressing as U.S. shoppers increasingly buy goods online.

The governors, writing on behalf of the National Governors Association, said states "are unable to collect $23 billion in sales taxes owed annually from remote sales," and that current practices are "in essence an unwarranted yet growing subsidy to Internet sellers at the expense of brick-and-mortar stores."

Last week, hundreds of state legislators met with members of President Barack Obama's administration and the U.S. Congress about the so-called "fiscal cliff" of automatic austerity and tax increases. They also made the case for changing Internet sales soon.

The lawmakers came away encouraged that federal legislation addressing sales taxes would soon be passed, with National Conference of State Legislatures Executive Director William Pound telling reporters he expects Congress to finish work on it in early 2013.

The current bill in the Senate, known as the Marketplace Fairness Act, would give states authority to collect sales taxes from large businesses after they simplify their tax systems. Not all states collect sales taxes, and those that do vary in the rates and structures they use.

The governors said it would help speed the economic recoveries of states, cities and counties without "raising taxes or increasing the federal debt."

(Reporting By Lisa Lambert; Editing by Maureen Bavdek)