Senate shows support for U.S. states taxing online sales

WASHINGTON, March 22 Fri Mar 22, 2013 7:46pm EDT

WASHINGTON, March 22 (Reuters) - The U.S. Senate on Friday approved a mostly symbolic measure on Internet sales taxes and showed that legislation allowing states to tax businesses beyond their borders has strong bipartisan support in an often politically fractured Congress.

Senators from both parties, including Republican Lamar Alexander of Tennessee and Democrat Dick Durbin of Illinois, approved an amendment to the Senate's budget resolution that would clear the way for states to collect the so-called "Amazon tax."

The budget resolution, though, is non-binding and the tax could have to be addressed again in other legislation.

Still, the approval should reassure states and "bricks and mortar" retailers that Congress will come together to pass a bill soon.

There was some opposition. Before the vote, Senator Kelly Ayotte of New Hampshire, a Republican, and Senators Max Baucus of Montana and Ron Wyden of Oregon, Democrats, spoke out against it, saying it would hurt businesses in states without sales taxes.

In 1992 the Supreme Court decided the patchwork of state tax laws made it too difficult for online retailers to collect and remit sales taxes. Currently, states can only tax Internet sales made by companies with a physical presence within their borders. In practice, that means online retailers such as Amazon.com Inc charge sales tax in some states and not in others.

Large Internet retailers are worried the tax could drive up the cost of doing business. They would also have to create new systems and software to collect the surcharges, adding to their costs. Amazon said in July it prefers having the tax issue resolved at the federal level.

When the 2007-09 recession caused states' revenues to collapse, both Republican and Democratic governors advocated for the tax as a financial solution that would not require the federal government to provide direct aid.

Last month both chambers took up identical bills on the tax.

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