WASHINGTON — A bill to allow states to collect taxes from online retailers inched forward Thursday in the Senate but not before a small, bipartisan group of opponents from states without sales taxes managed to delay work on the legislation for several days.

The measure, which would force many online shoppers across the country to pay sales taxes for the first time, appears poised for easy passage when the Senate returns in early May after a one-week recess. However, opponents successfully blocked consideration of several amendments, leaving in procedural limbo a proposal by Maine’s two senators to give retailers more time to comply with the new law.

Maine-based L.L. Bean — a major online seller and one of the state’s largest employers — as well as other retailers had sought the extension.

“The bill still has to go through the House and go to the president, so there is a fair amount of time that is going to elapse,” said Sen. Angus King, who co-sponsored the amendment with Sen. Susan Collins. “We are going to try to get the amendment attached either here or in the House.”

The online sales tax has broad bipartisan support in the Senate but could face more opposition in the House. As currently written, the bill would require online retailers with more than $1 million in sales to collect taxes and remit those payments to the buyer’s home state.

Supporters insist the measure is needed to “level the playing field” between the growing online retail market and traditional retailers — especially small “mom and pop” stores — who are required to collect sales taxes.

But a minority of senators from states without sales taxes — including New Hampshire’s senators — succeeded in delaying votes on the measure. They contend the bill would burden small businesses in their states unfairly.

“The proponents of the bill talk about this being a way to be fair to retailers. Well, it’s not fair to our retailers,” New Hampshire Sen. Jeanne Shaheen, a Democrat, said prior to Thursday’s vote. “I think giving states the ability to opt out or an exemption makes sense.”

According to the National Conference of State Legislatures, states lost an estimated $23 billion in taxes last year from online sales. Under current law, shoppers living in states with sales or use taxes are expected to pay those taxes, often on their income tax filings. Few of them do.

In 2011, only about 10 percent of Maine tax filers paid an additional “use tax” for out-of-state purchases, returning $2.8 million to the state. Maine Revenue Services estimates that the state loses $15 million to $25 million annually in tax revenue from online sales.

Earlier Thursday, King and Collins tried to introduce an amendment that would give retailers one year to begin collecting taxes from online buyers. Opponents blocked consideration of that and several other amendments; and under the Senate’s complex procedural rules, it was unclear Thursday whether the attempt to delay implementation will be considered in early May.

“This is not a new concept in any way. It has been talked about at length for over a decade,” Collins said in response to opponents’ complaints that the bill bypassed committee review. “If this bill were so problematic for retailers across the country, why would it have the support of so many retailers?”

L.L. Bean and other retailers had sought the longer time frame in order to put in place the computer programs capable of navigating thousands of different state and local tax codes across the country. The majority of sales at L.L. Bean — one of Maine’s largest employers — occur online or through catalogues.

“We’re not opposed to the legislation. We just think the implementation time needs to be reasonable,” said Carolyn Beem, spokeswoman for the Freeport-based company. While even a year was “on the short end,” Beem said it was preferable to the 180-day window in the current version.

A major complicating factor for retailers is that tax laws vary dramatically by state and even by locality. For instance, athletic shoes are taxed at a different rate than walking shoes in some states; but there are no uniform, nationwide definitions for products.

“We might sell something that we consider to be casual clothing and some states might consider it to be athletic wear, and that will change from state to state,” Beem said.

In Maine, groups such as the Maine State Chamber of Commerce and the Retail Association of Maine also have endorsed it. While Amazon.com, the nation’s largest online retailer, supports the bill, eBay has launched a campaign to oppose it.

Among those speaking out against the bill was Travis Adams, whose Hudson, N.H.-based business, Whaddy.com, reprocesses and sells items returned by Amazon or other retailers.

Adams said his company has six employees and is on track to surpass $1 million in sales. While that may seem like a large number to some people, Adams said, businesses such as his have such slim margins that it often translates into little if any profit. Requiring him to institute a tax collection system will only shrink those margins and hurt his ability to grow his company, he said.

“Really, it’s unfair to all small businesses,” Adams said in a phone interview. “It would require all of the businesses to become tax collectors for all of these other states, and that’s a tough thing for a small business to do.”


Kevin Miller — 317-6256
[email protected]
Twitter: @KevinMillerDC

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