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Internet Sales Issue Gives Rep. Kristi Noem a Chance to Become a Stateswoman

Capitol Building, Washington D.C.
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Our representative Kristi Noem and her colleagues in the House can close a huge tax loophole.  Will they see the fairness of the issue to small business and state governments?

The Senate passed, by a wide margin, a bill which allows states to collect taxes on sales from Internet purchases. If approved by the House and signed by the President, state governments could require retailers from out-of-state to collect sales tax when they sell products over in Internet, through radio and TV advertising, and from regular catalogs.

Currently, no such provision exists. Local retailers have found an odd bedfellow on this issue – state governments.

Local retailers complain they can’t compete with the unfair price advantage from Internet and other off premise sales, because there is no tax charged. State governments complain they are losing out on millions of dollars of revenue due to the loophole in federal law.

Most states are having a huge problem balancing their budgets. Collecting sales tax from these now tax free sales, could help. The revenue would be sent to the state where the shopper resides. .

Current law says states can require retailers to collect sales taxes only if the merchant has a physical presence in the state.

Large retailers with stores all across the country such as Wal-Mart, Best Buy and Target collect sales taxes when they sell goods over the Internet. But online retailers such as eBay and Amazon don’t have to collect sales taxes, except in states where they have offices or distribution centers.

Senators John Thune (R) and Tim Johnson (D) from South Dakota voted in favor of the bill. Now it is Representative Kristi Noem’s opportunity to support fairness for the hundreds of small businesses trying to survive in South Dakota. As a former state legislator, she should understand the importance closing this loophole for struggling state governments.

Her statements so far have been encouraging. She said, it is a fairness issue. She thinks in-state businesses can compete well against online-only retailers if there is “a level playing field.”

However, as this is being published she has not  committed to a “yes” vote.

You would think closing such a large, unfair loophole would be a no-brainer. Unfortunately, several conservative House members regard it as a tax increase.

Grover Norquist, the anti-tax advocate, and other conservative groups are against closing the loophole, and many conservative Republicans are afraid of voting against their wishes.

Opponents of the fairness issue say it would put an expensive obligation on small businesses because they are not as equipped as national merchandisers to collect and remit sales taxes. (Surely, there is a computer program, or one can be created, to deal with this issue).

The version passed by the Senate is, in my opinion, entirely too generous to online sales companies. Businesses with less than $1 million in online sales would be exempt.

EBay, a huge online seller, and therefore a very interested and powerful, special interest group, wants to exempt businesses with up to $10 million in sales or fewer than 50 employees.

Brian Bieron, senior public policy adviser for Ebay, clearly wants the closing of this loophole to disappear, so they can continue to unfairly compete with small businesses.

“The contentious debate in the Senate shows that a lot more work needs to be done to get the Internet sales tax issue right, including ensuring that small businesses using the Internet are protected from new burdens that harm their ability to compete and grow.”

Remember, Ebay, and others compete unfairly with small businesses across America. They have no interest in “leveling the playing field.”

Will Kristi Noem stand up for South Dakota retailers, and her state government? Will she voice her support for this bill in committee, on the House floor, and in front of the media? Will she use her powers of persuasion to convince conservative Republicans that this in NOT a tax increase, but it IS closing a loophole in the tax code which unfairly benefits the out of state big guys, at the expense of the in-state small guys?

Will Kristi Noem become a “Stateswoman” or will she follow her conservative fellow Republicans and remain a ”politician?”

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