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New federal legislation intended to ensure that states collect sales taxes from internet purchases is expected to create bookkeeping problems for Oregon businesses.
The Marketplace Fairness Act (S. 743), which passed the U.S. Senate earlier this month by a 69-27 margin, would require retailers who sell items online to collect the appropriate sales tax from the person making the purchase. In other words, if a person in Arizona is buying a product online from a vendor in Oregon, that vendor would be responsible for collecting the amount of sales tax applicable in Arizona and then send the tax money to that state.
While the bill passed the Senate by a wide margin, Senators Ron Wyden (D) and Jeff Merkley (D), who represent Oregon where no sales tax exists, voted against the bill and feel it would stifle small businesses.
Merkley pointed out that Oregonians have said ‘no’ to a sales tax nine times and that small businesses and families don’t want to face such a burden.
“It’s a regressive tax,” he said “It’s an inefficient tax, and this would force our Oregon retailers to collect this regressive, inefficient tax for other states and municipalities. That is just wrong.”
Wyden told colleagues on the Senate floor prior to the vote that the bill seeks to “take a few inches off of the little guy.”
He noted that big businesses, like Amazon, that support the bill, already pay taxes and would not feel the impact of S. 743. Instead, it would crush the small businesses that compete against the big companies.
“It, in fact, repudiates a lot of what we have done in the last 15 years to build a sensible policy that will build prosperity for bricks and clicks (small brick-and-mortar companies and start-up internet companies).”
In Prineville, several businesses sell goods and services online, and could therefore be affected by S. 743 if it is signed into law. These include Prineville Men’s Wear, Cada Dia Cheese, Flowers in the Attic, and BTL Liners, as well as divaroo.com, and deadlydivahunting.com.
Prineville certified public accountant Mike Mohan said that very few of his clients conduct out-of-state transactions and even less of them do so via the internet. Nevertheless, he believes that the requirements in S. 743 would create paperwork challenges for Oregon retailers.
“For Oregon businesses, that is going to be a huge change — huge — because they haven’t had to collect sales tax ever,” he said. “If you all of the sudden get dumped into the world of sales tax where you haven’t ever had to do it before, it’s a big change and a lot would apply to it.”
Mohan added that states familiar with sales tax, struggle with it from time to time. To illustrate his point, he noted that Oregon has just one tax court judge, but Washington has nine to 10 justices primarily due to sales tax disputes.
“It’s one of those things that it’s a patchwork,” he continued. “It’s not the same across the country and everybody has a different set of rules about what is subject (sales tax).”
Having passed the Senate, the Marketplace Fairness Act now awaits action in the House of Representatives. According to Andrew Malcolm, spokesman for Representative Greg Walden (R-Ore.), the bill will be considered by the House Judiciary Committee. Assuming it eventually reaches the House floor, Walden will likely vote the same way as Merkley and Wyden.
“I don’t expect Congressman Walden will support it if it comes up in the House,” Malcolm said.