June 4, 2012

LePage, Pingree align on collecting Internet sales taxes

BY MAL LEARY, Capital News Service

AUGUSTA -- Gov. Paul LePage is urging passage of a bill in Congress that would allow states to collect tax on sales over the Internet, but only U.S. Rep. Chellie Pingree, D-1st District, is supporting the bill, with the rest of the delegation saying they are not convinced.

"I signed on to the bill," Pingree said, "It's really a reflection of what is going on with Internet sales. I think it provides some equity for main street businesses."

The legislation, called the Marketplace Fairness Act, was endorsed by LePage in March and he urged members of Maine's congressional delegation to give the measure their strong support because it would mean the state would be able to collect sales taxes from the big online retailers such as Amazon.com.

"A damaging inequity exists in the retail marketplace because some online retailers are not required to collect Maine sales tax, but Maine retailers are," LePage said. "Not only does this hurt Maine businesses, it hurts the state."

He is convinced if local retailers could compete on an equal playing field when it comes to sales taxes, it would bolster the state economy and increase tax revenue. He stressed the measure would not mean new taxes, but better enforcement of existing tax law.

"All I am proposing here is collecting taxes that are already owed the state," he said.

That is because the sales tax is defined in law as a sales and use tax. A person pays the five percent tax for either buying that new television online or for using it in Maine.

A University of Kentucky study estimates Maine will lose at least $32 million this year from sales and use taxes due on Internet sales but not collected. That may be low with Internet sales up 15 percent this last holiday season.

"There is no denying that passing the bill would give thousands of small Maine businesses a real boost," LePage said.

But while Pingree agrees with LePage, his arguments have not convinced the other three members of the delegation to support the measure.

"Now that this bill has been re-written to exempt very small businesses that are mainly home-based businesses, I am more open to this bill," said Sen. Susan Collins. But she added she still wants to "take a further look at it."

She has met with Maine business owners and agrees with the goal of the legislation, but said she wants to hold meetings with the Senate sponsors of the bill and have her staff analyze the measure before she is ready to endorse it.

"I met with store owners from Maine that have given me several examples of unfair competition they are facing," she said.

Sen. Olympia Snowe said she is still uncertain about the bill. She said although the sales tax should be paid by consumers now, the facts are that the tax is not being collected.

"It could present a problem to the overall economy," she said. "I have a concern about what amounts to a tax increase overall at this point in time."

Snowe said she understands the fairness argument by retailers, but she is also hearing from some that the exemption for small companies with sales of less than $500,000 a year is not enough and that it should be a higher amount.

"I will continue to work on these issues and consider what changes might be proposed," she said. Snowe said she is still undecided about the bill.

Rep. Mike Michaud, 2nd District, said he has not taken a position on the bill and is still reviewing its provisions. He said it he will devote more time to the issue if it looks like it will be considered by the House this summer, but he doubts that will happen.

"I have been focused on other pieces of legislation that will be on the floor for a vote," he said. "I don't see the House leadership bringing this up for a vote."

Michaud said he understands the fairness issues that have been raised by Maine retailers, but he is not ready to support the measure.

The issue is a high priority for some state lawmakers. A measure, similar to one adopted by some states, asserts the state's right to collect the sales tax from companies that have no physical presence like a store or warehouse in the state. Those measures are being challenged in federal courts.

The legislation passed the Senate in the closing days of the session, but failed in the House.

 

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