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Warner backs bill to let states tax Internet sales

The U.S. Senate may vote this week on a bill that would let states require online retailers to collect sales tax on online purchases.

Currently, states can’t compel an Internet retailer to collect the sales tax if that retailer doesn’t have a physical presence in the state.

State lawmakers in Virginia and elsewhere say they’re missing out on millions of dollars in potential sales tax revenue. In Virginia, state law requires customers to send the state the sales tax due on online purchases, but few people do.

Brick-and-mortar retailers have been pushing for the federal bill, because they say online retailers have an unfair advantage, since people who buy an item online don’t have to pay the sales tax.

Sen. Mark Warner said Tuesday that he backs the federal bill, which would apply to retailers that have more than $1 million a year in sales.

In a speech on the Senate floor Tuesday, Warner said there is currently an “uneven playing field” between online retailers and brick-and-mortar stores, and that the bill would also help local and state governments.

“As a former governor, I can tell you that the inability of states and localities to gather uncollected revenues undermines dramatically their ability to invest in K–12 education, police and fire prevention, funding for roads and bridges, funding for public safety, environmental causes, you name it, all of the basic core services that state and local governments perform—so many of them are directly funded in a major way by local or state sales taxes,” Warner said in his speech.

Warner noted that the sales tax already should be paid, by customers, so this would not technically be a new tax. That’s a point Republicans who back the bill, like Gov. Bob McDonnell, have also been careful to make.

Virginia leaders are watching the bill’s progress because McDonnell’s transportation funding reform legislation counts on revenue that the state might get if the federal bill passes.

It’s estimated that Virginia would receive millions of dollars more in sales tax revenue if Internet sales were taxed—around $250 million in fiscal year 2014, according to estimates in the transportation bill, and up to $320 million by fiscal year 2018.

The bill allots much of that revenue to transportation, with some also going to education.

But if Congress doesn’t pass an online sales tax bill by 2015, the state transportation bill’s language requires an additional increase in the sales tax on gas.

The transportation bill eliminates the current 17.5 cents-per-gallon gas tax, replacing it with a 3.5 percent sales tax on gas at the wholesale level. If Congress doesn’t act on the Internet sales tax bill by 2015, that gas tax will go up to 5.1 percent.

Chelyen Davis: 540/368-5028