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April 7, 2013

Federal lawmakers push for online sales tax

When Katherine McHenry answers the phone at a Building Blocks Toy Store in Chicago, she may get a caller who wants to negotiate a lower price on an item she is selling because it can be purchased for less money online.

“I just basically tell people I can’t control the fact that I have to charge the sales tax,” said McHenry. “What they’re using for leverage is, ‘I can buy it on the Internet for basically a 10 percent discount’ “ when they don’t pay taxes.

Walk-in stores like McHenry’s are on the frontlines of a tax war that may be entering a new phase in Washington.

Federal lawmakers in both chambers are showing signs of warming to legislation that would require out-of-state Internet businesses to collect taxes at the rates levied in the communities where purchasers live. A sizable exemption still would allow Internet companies to skip that requirement if they didn’t do $1 million worth of sales in the previous year.

In what was viewed as a breakthrough moment, the proposal was supported last month on a test vote in the upper chamber, in an effort led largely by the Senate’s No. 2 Democrat, Dick Durbin of Illinois.

Critics argue that the legislation would mean more taxes on Americans who are overburdened, but Durbin insists, “We’re not talking about imposing a new tax. Not at all.”

To Durbin, it is “just a question of fundamental fairness.”

In the dozen or more years since the issue of sales taxes on out-of-state Web commerce first surfaced, technology has changed rapidly and “Internet commerce has boomed,” said Max Behlke, the point person on the issue for the National Conference of State Legislatures.

Like Building Blocks in Chicago, other long-established local merchants increasingly are seeing their stores serving as “showrooms” where consumers visit to check out pricey products, ranging from TVs and computers to high-end cameras — then turn to the Internet to avoid paying sales tax, Behlke said.

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