Pat Dollard

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New York Post:

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By KAJA WHITEHOUSE

The days of buying online to avoid paying sales taxes may soon be over.

A bill is expected to be introduced to Congress this week that would force retailers like eBay and Amazon.com to start collecting sales taxes on behalf of states from people who shop online or through mail order.

It’s not a new effort: Attempts to close the online tax “loophole” have been going on for at least a decade.

But supporters of the bill think Congress may finally give in to their demands because of their own pressure to lend support to financially battered state governments.

“This would be fiscal relief for the states that wouldn’t require any money from the federal government,” said Neal Osten, a senior policy analyst with the National Conference of State Legislatures, which is drafting the bill.

Osten pointed to a recent study that said state sales tax collections fell to their lowest levels in 50 years at the end of 2008.

The study by the Rockefeller Institute, which is the public-policy research arm of the State University of New York, said that fourth-quarter 2008 sales taxes dropped by 6.1 percent, and that preliminary figures for the first three months of 2009 suggest even steeper declines.

States say reduced sales tax revenues threaten local and statewide budgets, which affects everything from schools and garbage collection to fire and police.

Others claim that online retailers should be forced to collect the same taxes that “brick and mortars” do so that local merchants are not put at a sales disadvantage.

Currently, people who shop online often get away with not paying any sales tax — although this is not because they don’t owe any.

Rather, retailers don’t want to spend their time keeping track of a complex array of differing state, municipal and city tax rules.

“It makes us the tax collectors,” said Jonathan Johnson III, president of online retailer Overstock, which has long opposed efforts to get retailers to collect sales taxes.

“If we ship something out to Long Island right now, we don’t know what sales tax to charge or collect. And there may be two or three different levels. There may be a state [tax] level, a county level and a city level,” Johnson said.

Osten said the new bill, which is expected to be introduced by Sen. Mike Enzi, (R-WYO) and Rep. Bill Delahunt, (D-MA), is being drafted to make it easier for retailers by requiring states to inform retailers when there’s a change in the tax code, such as a sales tax holiday.

Under the current rules, sales taxes often slip through the cracks. Shoppers living in Vermont, for example, aren’t required to pay sales tax at the time of purchase when buying stuff on Amazon.com.

New Yorkers, meanwhile, can avoid paying the tax man when they shop at Overstock.com.

Technically, online shoppers are supposed to keep their receipts and pay their home state when filing income taxes in April. But even good citizens often don’t realize they’re supposed to do this, admitted Osten.

New Yorkers may be less impacted by the bill’s passage. Since last summer, New York residents have been coughing up online sales taxes at places like Amazon.com as the result of a new state law that says online retailers must collect sales taxes if they advertise through New York-based Web sites.

The ruling is being challenged by Amazon.com and Overstock.com, which also pulled advertising from all New York sites. kaja.whitehouse@nypost.com.