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Ayotte renews call to fight Internet sales tax

New Hampshire Union Leader

March 28. 2013 9:42PM
Sen. Kelly Ayotte discusses efforts to stop an online sales tax with business leaders at her downtown Manchester office Thursday. (DAVID LANE/UNION LEADER)

MANCHESTER - U.S. Sen. Kelly Ayotte, R-N.H., assured a roomful of online business owners that she would keep up the fight against an Internet sales tax, after a March 22 Senate vote in which 75 senators expressed support for the idea.

In a business roundtable at her Elm Street office Thursday morning, Ayotte heard a litany of concerns, ranging from cost and complexity, to the fear that the "Marketplace Fairness Act" would be the first step in broader taxes or restrictions on Internet commerce and online communication.

The National Governors Association and the National Conference of State Legislatures are pushing for the authority to collect sales taxes on online purchases by residents of any state that has a sales tax.

New Hampshire residents, who live in one of only five states that do not have a sales tax, would not have to pay sales taxes on any online purchases. But online merchants based in New Hampshire would have to collect sales taxes from customers originating in sales tax states if the measure becomes law.

Support for tax

A 1992 U.S. Supreme Court decision gave states the ability to collect taxes from catalog and online purchases, but only if the online business has a "brick and mortar" facility in the state, or if residents voluntarily send the tax payments to state collectors. The Marketplace Fairness Act would force online sellers to collect the taxes on online purchases and send them to the sales-tax state where the buyer resides.

"If I have to become a tax collector on top of what I'm already trying to do as a startup, I'd be out of business," said former State Rep. Jenn Coffey, who in 2011 started Knives, Lipstick and Liberty, with products ranging from pepper spray in lipstick containers to bullet-proof clipboards.

Sen. Dick Durbin, D-Il., assistant majority leader, has been trying to get an online sales tax approved since 2011, when it was first called the Mainstreet Fairness Act.

His most recent attempt to get the measure to a vote failed in late December, when it was added as an amendment to the National Defense Authorization Act. The Senate voted Dec. 3 to close debate on the measure without considering the amendment.

Last week, Durbin succeeded in getting a statement of principle in support of the act included in the Senate budget resolution, and was able to get 75 votes, suggesting a bipartisan majority will support the bill if it comes up for a vote. The bill, cosponsored by 28 Republicans and Democrats in the Senate and 48 Republicans and Democrats in the House, has been endorsed by more than 268 labor, business and government organizations and 22 governors, according to Durbin.

Business burden

Given that level of support, and the fact that 45 states could benefit from the additional tax revenue, Ayotte told the group of New Hampshire Internet business operators that she expects the legislation to be introduced some time this year.

"I'm concerned about it, but I still think we can turn this around," Ayotte said. "A lot of senators are just formulating their position for the first time, and because this is a revenue measure, it would have to originate in the House. We will have the opportunity to let House members know how bad this is for business in this country."

Rick Botnick, president of E&R Laundry and Dry Cleaners, headquartered in Manchester, said Internet business now accounts for 70 percent of his sales, with orders coming in from all over the country and beyond. He said he simply would not have the resources to calculate, collect and deliver sales taxes for 45 state and thousands of local or county sales tax jurisdictions, whose rates are constantly changing.

Big vs. small

Larger online retailers, like Amazon, which support the measure, have the resources, but smaller retailers don't, Botnick said. "I would need one or two full-time people, if not a hefty fee to someone else, just to manage this," he said.

Joe Cortese, owner of NobleSpirit, a Pittsfield-based coin and stamp dealer using eBay as its sales platform, has been active in opposition to the tax since it was first proposed. He said the Internet gives small business a chance to compete with the multi-national corporations, and that retailers like Walmart and Amazon are supporting the tax as a way to squash competition.

"I find it astonishing that anyone would think this is a good idea," he told the group. "You would eradicate all the gains the Internet has made, all the things the Internet has made possible."

Ayotte does not think Cortese's fears are overstated.

"Because this has such huge implications, given the nature of Internet commerce, I've sponsored a bill to impose a moratorium on all Internet taxation," she said.

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