AUGUSTA, Maine — Maine could get a boost of more than $65 million in sales tax revenues next year if Congress passes legislation introduced this month that would require online retailers to collect sales taxes. But Maine’s congressional delegation is divided on the issue.
“The fact is that our purchasing habits today have changed dramatically and people can go online and buy an item and have it shipped to them the next day,” Rep. Chellie Pingree, D-Maine, said in an interview. “I support the legislation to help our states and make a fairer tax system.”
Pingree said small-business owners who collect sales taxes are at a disadvantage when online retailers are not collecting a sales tax. She said that even though in many states, like Maine, the sales tax is really a sales and use tax, many consumers do not pay the tax owed when they make an online purchase.
“We need to make the taxes fairer, and this legislation will do that,” Pingree said.
Sen. Olympia Snowe, R-Maine, disagrees. She said the economy is in such bad shape, she does not want to impose what would amount to a new tax.
“I am concerned about imposing a tax and what it would do on the economy,” she said in an interview. “I just don’t think this is the time to be imposing a new tax.”
Snowe, a member of the tax-writing Senate Finance Committee, said if all of the sales taxes owed but not being paid were collected, it would mean fewer dollars for consumers to spend in what she called a fragile economy.
The National Conference of State Legislatures, when it endorsed the legislation, said a University of Tennessee study estimates that in 2012 the states will lose $23.3 billion in uncollected taxes on Internet sales. Maine is estimated to lose $65.4 million.
The legislation, introduced by Sen. Richard Durbin, D-Ill., in the Senate and by Rep. John Conyers, D-Mich., in the House is a response to a 1992 U.S. Supreme Court decision that ruled a retailer is not required to charge and collect sales taxes if the business lacks a physical presence in that state. The ruling noted that Congress could authorize the tax.
The legislation would allow states that are members of the Streamline Sales Tax Governing Board to require all retailers to collect sales taxes for those states. Maine is a member of the organization.
Technically everyone owes tax when they buy an item online and use it in their home state. Most states with a sales tax actually have sales and use tax, but it has always been difficult to enforce.
Maine has a line on its income tax form that allows a person to enter an actual amount of out-of-state purchases they have made or use a calculator that estimates purchases based on income. Some list no out-of-state purchases, so they pay no additional use tax.
“I have not reviewed the House bill yet, but I will carefully look at it,” Rep. Mike Michaud, D-Maine, said in an interview. “I do understand the problems small retailers have faced.”
He said he has had local store owners tell him of instances where customers had browsed in the store and taken pictures of merchandise with their cellphones and told store clerks they were going to buy the product online.
“This is a big issue for the states and I definitely think that Congress should be looking at it,” Michaud said. “I think that it is time for Congress to take a comprehensive look at all tax policy.”
Sen. Susan Collins, R-Maine, said she is not sure Congress should get involved with the issue. She said the states can form compacts without the need for legislation and implement the collection of taxes on Internet sales.
“I have no doubt that the states are losing revenue,” she said in an interview, “I think taxpayers forget that when they order items over the Internet they should be paying use tax.”
Collins said before she is convinced that Congress should step in, she wants to hear from all sides of the issue. She said Internet retailers appear to be opposed while many small retailers support the legislation and there are many good arguments on both sides.
“The fact is, if everybody has to collect this tax than nobody is hurt,” Pingree said. “I think we should move forward and pass this legislation as soon as possible.”