Former Iowa politician, Christopher Rants, now head of an organization calling itself the Main Street Fairness Coalition, lobbied the Pa. House Appropriations Committee on Tuesday telling it that Internet sales are costing the state about $706 million in lost sales taxes.
The MSFC, until recently called the e-Fairness Coalition, is a well-funded lobbying group comprised of large brick-and-mortar retailers, shopping centers and publicly traded real estate investment trusts. The goal of the MSFC is to “level the playing field” and “eliminate the unfair tax advantages” that are not available to traditional retailers.
Essentially, the privately-funded group wants Congress to overturn long-standing laws governing the collection of sales tax on mail-order and Internet retailers. Cash-starved states are looking at the taxes as new source of revenue to help offset massive budget deficits.
Currently, federal law protects online retailers from having to collect sales tax on goods they ship to states in which they do not have a physical presence. A 1992 court decision, Quill v. North Dakota, established the law, which at the time applied to catalogue sales, although has been interpreted to also include Internet sales.
Rants told lawmakers that 24 states have signed on to a program that would allow them to collect the tax for each other, and asked that Pennsylvania be the 25th member of the group. The state would have to agree to conform its definition of taxable items to a uniform set of rules adopted by all states in the group.
States would also have to provide software to smaller retailers to allow them to more easily collect the sales taxes.
Existing laws in most state require residents to file a “use tax” return, to declare goods that are purchased out-of-state, and shipped to an address within the state. The number of taxpayers that file return in each state that require it are typically small.
Last month, Illinois became the first state to announce that it would require residents to declare out-of-state purchases on their individual Illinois state tax returns. Tax authorities there said they planned on auditing purchases made by individuals, and would assess interest and penalties on taxpayers that fail to report purchases