Tennessee Governor Bill Haslam defended his record on taxes before a Congressional committee Tuesday. He’s trying to convince lawmakers in Washington that states need more power to collect sales taxes from Internet retailers.
The state’s Department of Revenue estimates that it misses out on some $400 million in sales tax collections each year because of online shopping. If the store doesn’t have a physical presence in a state, it doesn’t have to collect the sales tax. Customers are supposed to pay on their own, though almost no one does.
The federal Marketplace Fairness Act would give states the ability to require online retailers to collect the taxes. During a committee hearing, a congressman suggested to Governor Haslam that it could be construed as a tax increase. Haslam says no.
“No, we’re trying to help a nation of people right now that are breaking the law by not paying a tax that they owe.”
Critics of the Marketplace Fairness Act say it would be too hard for Internet stores to keep up with hundreds local tax rates. Haslam frames it as a matter of leveling the playing field for brick and mortar retailers.
“I understand all of the issues that have been talked about. It is very complex. But it’s too big of an issue of fairness not to address.”
Haslam spoke on behalf of the National Governors Association. The NGA cites estimates of $20 billion in sales taxes nationwide that go uncollected each year on account of online retailers.
In Tennessee, the issue of online sales tax was brought to a head when Amazon began building distribution centers in the state without collecting taxes. An agreement approved by the General Assembly would require Amazon to begin collecting sales taxes in Tennessee by 2014, even without federal legislation.