Tennessee’s Haslam To Relay Governors’ Wish For Online Sales Tax

A congressional committee will hear testimony Tuesday (July 24) on a bill that could send billions of dollars to the states each year.

Tennessee Governor Bill Haslam and Wayne Harper, a Utah state representative, are among those scheduled to appear before the House Judiciary Committee to comment on the “Marketplace Equity Act of 2011,” legislation that would allow states to require online retailers to collect and distribute state sales taxes.

Because of a 20-year-old U.S. Supreme Court ruling, few states have netted tax revenue from online retailers that aren’t physically located within their borders, although juggernaut Amazon has made deals with several states — most notably California — to begin collecting sales taxes in the future.

The result is that each state misses out on tens of millions, if not hundreds of millions, of dollars each year, as Stateline has reported.

A 2009 University of Tennessee study, for instance, estimated that states collectively could lose as much as $12.65 billion in 2012. And, in a widely-cited report released last week, the nonpartisan State Budget Crisis Task Force identified the shift to untaxed online sales as a key reason that state tax bases are shrinking, exacerbating a budget crisis that  threatens states’ ability to  “meet their obligations to public employees, to creditors and most critically to the education and well-being of their citizens,” according to the report.

For more than a decade, governors have pressed Congress to give states the power to require tax collection from online sales. And more recently, Republican Governors, such as Haslam, are joining the mix, spurred by their states’ lingering budget woes. Republican supporters include Iowa Governor Terry Branstad and New Jersey Governor Chris Christie, who has described online taxation “an important issue to all the nation’s governors,” according to the Wall Street Journal.

Despite that increasingly bipartisan support in states, however, it’s far from certain that the GOP-led House will follow suit in Washington.

“In this election season, any reference to tax increase, especially for a conservative Republican, is toxic,” U.S. Representative Steve Womack of Arkansas, a sponsor of the House bill, told POLITICO last week.

Womack has said his bill, which exempts small online retailers, shouldn’t be seen as a tax increase, but rather the closure of a loophole.

“The intent of this legislation is …to close a long-standing loophole that puts America’s brick and mortar businesses at a competitive disadvantage,” he said in a release upon introducing the bill.