Lamar Alexander promotes bill requiring online retailers to charge sales tax

Sen. Lamar Alexander

Authored By Chloé Morrison

On the floor of the United States Senate Thursday morning, Sen. Lamar Alexander pitched the Marketplace Fairness Act, which he said will “close a 20-year loophole that distorts the marketplace.”

Along with a group of lawmakers from both parties, Alexander, R-Tenn., is co-sponsoring the bill that would require businesses, such as Amazon, to charge sales tax for online purchases.

“We strongly believe that now is the time for Congress to act,” he said.

“Many Americans don’t realize that when they buy something online, which we increasingly do today, or order something from a catalog from a business outside of our own state that we still owe state sales tax,” he said. “So, what we are talking about doesn’t even rise to the dignity of a loophole. It’s a law. It says if you buy it, you owe it.”

The current law isn’t enforced, and many people don’t pay sales tax for online purchases.

Chattanooga leaders, such as Mayor Ron Littlefield, and state leaders, such as Gov. Bill Haslam, have said in the past they support a federal deal on this topic, which prompted debate at a state level earlier this year.

Without a federal law, many argue that competition between the states is unfair.

State leaders recently reached a deal with Amazon leaders on the issue of sales tax collection.

Thursday morning, Alexander said the current law-or lack of enforcement of that law-is hurting small businesses in Tennessee.

He told a story about the Nashville Boot Company, whose leader said that customers come to the store, try the products, talk to the salespeople and then go home to buy the product online to avoid the sales tax.

“Similar businesses that are selling the same thing are being treated entirely differently,” Alexander said. “It isn’t right, and it isn’t fair.”

The money gained by collecting these taxes could help the state, he said. It could help pay outstanding teachers, reduce college tuition or ensure no income tax.

Also happening Thursday:

Rep. Kevin Brooks, R-Cleveland, and Rep. Eric Watson, R-Cleveland, pushed legislation through the state House today that helps solidify the agreement reached last year between Gov. Bill Haslam and Amazon officials.

This legislation will ensure that Amazon will pay Tennessee sales taxes if a national online sales tax law is not passed by the federal government by 2014.

Alexander also said that there is software available now that would make it simple for online retailers to know how much sales tax to charge for each customer, depending on the state they ordered their purchase.

The proposed legislation also includes an exemption for small businesses that sell less than $500,000 in remote sales each year, Alexander said.

Local reaction
Alexander said that Amazon leaders support this legislation.

Some organizations, such as the National Taxpayers Union, oppose the idea, and local residents had mixed thoughts.

Ginger Moore, who operates an online business just outside Chattanooga, said she thinks the legislation could pose problems for very small businesses.

It wouldn’t be as much of a problem for bigger businesses, such as Amazon, she said.

“Making a small business retailer in one state collect and pay sales tax on online purchases for states they are not in would be a huge problem and will drive many small businesses out of business because of all the excessive paperwork and legalities involved,” she said.

Local resident Rhiannon Maynard said that if it is a hassle to file taxes for different states, then there could be a flat federal online tax rate or some other solution.

“If there is a will, there is a way,” she said. “And there’s an app for that, or at least some software to make it much simpler.”

Brian Lutz said he wonders who would vote to essentially add tax for online purchases-besides small business owners-if residents in Tennessee aren’t currently being forced to pay them.

And Mike Kelley, a Chattanooga resident, said he only supports paying tax for online sales if the physical store is also located in his state.  

He thinks small businesses need to adapt to the new technology, or die.

“It would be like your home state asking you to pay sales tax on something you bought on vacation in another state,” he said of being required to pay sales tax for online purchases.