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U.S. Senate’s ‘symbolic’ vote on online taxes keeps cash-hopes alive in the Washington Legislature

Post by Brad Shannon / The Olympian on March 23, 2013 at 12:42 pm | No Comments »
March 25, 2013 3:04 pm
Rep. Gary Alexander
Rep. Gary Alexander

The U.S. Senate voted 75-to-24 Friday to approve a budget amendment that doesn’t yet usher in a new era of taxing online retail sales in all states. But it did show that the so-called Marketplace Fairness Act has enough support to avoid a filibuster.

The National Conference of State Legislatures hailed the vote Friday night as a step toward states and local governments being able to collect some $23 billion in lost taxation. The state Department of Revenue estimated last year that Washington’s state and local governments could see a two-year windfall of up to $483 million – more than $306 million of it going to state coffers.

The federal legislation is backed by the Washington Retail Association, Amazon.com and other major retailers but opposed by eBay. NCSL is strongly on record in favor, and Washington’s Legislature cast bipartisan votes last year to pass Substitute Senate Joint Memorial 8009, which expressed support for congressional action.

NCSL put out a statement Friday night that said, in part:

A major step forward for the Marketplace Fairness Act was achieved today in the United States Senate. An amendment to the budget resolution for FY 2014 was introduced by bill sponsors Senator Mike Enzi (R-Wyo.) and Senator Dick Durban (D-Ill.). The amendment passed 75 to 24, indicating more than enough support to ultimately pass the Senate and avoid a filibuster. The amendment’s passage is a big win for state and local governments that have long championed the legislation. This is also a win for brick-and- mortar business owners throughout the country who currently suffer from a competitive disadvantage. … The Marketplace Fairness Act would allow states to collect sales taxes on remote and online sales. In 2012 alone, it was estimated that states lost out on a collective $23 billion dollars. In light of the federal reductions affecting states, passing the Marketplace Fairness Act is a way for Congress to offset some of these reductions, without spending a penny in federal funds. Any new cash would be welcome to policy-makers in Washington state, where lawmakers are wrestling with a roughly $1.2 billion budget shortfall for the next two years. That shortfall is compounded by a Supreme Court ruling that requires anywhere up to $1.7 billion in new investments in K-12 public schools.

So far – two thirds of the way through a 105-day session – the Republican-led Senate Majority Coalition Caucus is dead-set against new taxes while the Democrat-controlled House and Gov. Jay Inslee are both expected to outline tax-breaks they would end to raise funds for education.

A windfall from federal taxation could help cushion the clash that is about to begin at the Capitol once the Senate majority puts out a budget and Inslee lays down his plan.

Rep. Gary Alexander, the House Republican lead on budgets and ranking minority in the House Appropriations Committee, said Saturday that the U.S. Senate vote was “great news.”

Alexander a week ago offered a budget plan to put a net $566 million more into K-12 schools without tax increases, but his plan would have virtually no reserves, slash welfare benefits and cut $50 million in sales-tax adjustments being paid to local governments.

Under the Streamlined Sales Tax Agreement that Washington entered into with other states in 2008, the delivery destination of a purchased product is used to decide the rate of sales tax that might apply, and cities have convinced state lawmakers they are unfairly hurt by it, which justified the subsidy.

“If this was to pass I could remove that $50 million) out of my budget and turn around and probably put a plus number into the revenue side,’’ Alexander said. Asked where he’d put the funds, he said, “It depends how much it is.’’

But in any case, he expects it would be more than $50 million.

The Senate amendment exempts businesses with less than $1 million in annual out-of-state sales, twice what last year’s bill sought. The state Department of Revenue put out a statement about the issue last year, saying:

The Department estimates that the state only collects sales tax on about half of online and mail order sales due to a 1992 U.S. Supreme Court decision that prevents states from requiring out-of-state businesses without a presence in a state to collect sales tax on sales to customers in that state. The Marketplace Fairness Act would require out-of-state companies … in remote sales to begin collecting and remitting sales tax on sales to customers in Washington and other states that adopt certain changes to their tax laws to simplify collection. Washington already has adopted the Streamlined Sales and Use Tax Agreement, so it could begin collecting these taxes 90 days after the bill is signed into law.

The Department estimates that the act would generate $306.5 million for the Washington State General Fund during the Fiscal Year 2013-15 biennium and another $176.5 million for local governments.

Interest groups on both sides of the issue were spending a lot on members of Congress last year, according to this tally by Maplight, a nonpartisan research group that looks at the influence of money in politics.

Backers of the tax act have this explanatory web site.

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