A federal bill that would allow states to force online retailers to collect sales tax was debated today at a U.S. House of Representatives' Judiciary Committee hearing, though the head of a state retail association said the effort is just as likely to stall as New Jersey's bill did when the state reached a compromise with Amazon.com in May.
"It's encouraging to see activity today, but one would think the policymakers in Trenton and Washington would get legislation passed that even Amazon supports. It's a classic example of how dysfunctional Washington is," said John Holub, president of the New Jersey Retail Merchants Association. "I wasn't getting a strong sense of this being done before the election. Though I think it's not a matter of 'if' but 'when' on this bill, and I'm hoping something will be done relatively soon. But the one thing Washington can be counted (on) is not doing the right thing and not doing it in a timely fashion."
At the hearing, Tennessee Gov. Bill Haslam said online retail sales in the United States grew four times faster than sales at brick-and-mortar stores last year, so "the argument that this is a small piece of the economy just doesn't hold up."
"Let states have the authority to collect state sales tax already owed (to) us," Haslam said at the hearing. "I know in our state and others, some of that money would be used to cut taxes."
According to Gov. Chris Christie, when Amazon begins collecting sales tax in New Jersey on July 1, the state will collect between $30 million and $40 million in additional sales tax revenue.
But if New Jersey is permitted to collect sales tax from all online retailers under a federal law, it's projected to collect a total of $310 million in additional sales tax revenue on all e-commerce transactions in 2015, according a May 2011 study by Rutgers University's Edward J. Bloustein School of Planning and Public Policy.
"The state is losing out on hundreds of millions of dollars in tax revenue, and it will only continue to grow exponentially," Holub said. "The federal bill is a realization that our tax policy needs to be modernized. Amazon was the biggest issue, so it's just a matter of time before everyone else comes to that realization."
However, without a federal law, Holub said there is no incentive for online retailers based in New Jersey to follow Amazon's lead in cutting a deal with the state to collect sales tax, since "Amazon is so large, and the reason for them building distribution centers is to eventually have same-day delivery. I don't think the other retailers are on that level yet, so there's no pressure for them to make a compromise with the state."
"Legislation in Trenton has stalled because Amazon cut a deal, so any kind of e-fairness legislation is unlikely to move anytime soon," Holub said. "We're still lobbying actively, but if the bill stalls in Washington, then we'll try to revive our state efforts to catch these other retailers."