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VEGAS INC OPPONENTS SAY online sales TAX WILL STYMIE commerce SALES TAX, From page 1 The Marketplace Fairness Act — previously known as the Main Street Fairness Act — originally was pitched in Congress not only as a revenue-generator for states but, as the titles suggest, a "fairness" measure to put brick-and-mortar stores on a more even playing field with Internet merchants. The legislation has been kicking around the Capitol for several Congresses, earning an extra few headlines late last year as lawmakers attempted to work the measure into the "fiscal cliff" deal. But then, as now, congressional lawmakers have been too divided to get anything done. Nevada lawmakers have been discussing the potential power of an online sales tax since at least the 2011 session. Under a federal law, according to a 1992 Supreme Court ruling, states can't demand sales tax collections from sellers not physically present in the state. It is possible for states to strike deals with sellers independently to collect sales tax on items sold to in-state residents. Last year, Gov. Brian Sandoval made such a deal with Amazon.com, estimated to be worth about $16 million once it takes effect in 2014. But there's more money to be made if, instead of cajoling Internet companies into collecting sales tax, Nevada simply could demand it as a matter of law. Not everyone in Congress agrees. As many Nevadans see it, the online sales tax bill could supply much-needed dollars for public services and education. But to representatives in several other states, especially those that have no sales tax, it's an intrusion that threatens to sap entrepreneurs and stymie commerce. "Online businesses should be a source of jobs, not a source of new tax revenue," said Republican Sen. Kelly Ayotte from New Hampshire, a state with no sales tax. "Our Internet retailers shouldn't be forced to become tax collectors for other states." It's not just Republican pushback: Democratic Sen. Ron Wyden from Oregon, which also has no sales tax, opposes an online tax. "Small online storefronts are taxed differently than big-box brick-and-mortar operations because they are different," he said. "A state can force an in-state store to collect and remit sales tax because that store benefits from state services." chris morris The Marketplace Fairness Act has 23 co-sponsors in the Senate and 42 sponsors in the House of Representatives. Even if supporters can build up their numbers, several hurdles remain before the bill could become law. The question of whether to green-light an online sales tax is one that the Senate Finance Committee, the House Financial Services Committee and Congress would typically considers in bulk with other smaller provisions of the federal tax code. "The big issues aren't so much states being able to collect revenue," said Bill Robinson, an economist with UNLV. "The big issues are, is there going to be federal tax reform? Corporate tax reform?" If the fate of the online sales tax is pinned to the future of tax reform, that's likely bad news for those hoping to strike Internet gold. Although experts predicted that tax reform would emerge as the main issue occupying Congress' attention after the 2012 election, since the start of the year, Congress has been consumed by its own budget problems, most recently the "sequestration" cuts that will slice $85 billion from the annual federal budget. Before that, there was the fiscal cliff, which settled some questions about income taxes but barely addressed corporate income and tax deductions. Before the fiscal cliff, there was the debt ceiling deal. Congress has been going through rounds of arguments over taxes and spending since the height of the reces- sion. As a result, tax issues have largely been tabled. And if Congress doesn't work out its budgeting soon, they may be tabled again until after the 2014 elections. President Barack Obama held meetings with rank-and-file members of Congress last month in which he discussed areas where Republicans and Democrats could find common ground. According to lawmakers in the meetings, tax reform emerged as an area with serious potential — but only in a certain time frame. "In all of the big-picture items … if it's going to be effective, it's probably (got to happen) by midyear," Republican Sen. Jerry Moran said. "If we miss the opportunity in summertime, the likelihood of it happening diminishes." Senate Majority Leader Harry Reid's office didn't have a better estimate for when a bill on online sales tax might come up, although a spokeswoman said it is one of the main issues Reid has heard about from Nevada lawmakers. The prognosis could frustrate Nevada legislators hoping to include new cash flow from online sales taxes in the budget they are building this session. But many experts stress that the health of Nevada's economy depends less on the collection of Internet sales taxes and more on broad tax reform in Washington and Carson City. "The tax code encourages corporations to do certain things; it encourages consumers to do certain things," Robinson said. "Not getting started on those problems means that we're not generat- ing a lot of tax revenues in our state." At the federal level, several tax programs of particular importance to Nevada have not been permanently resolved. "One that regularly worries us is whether or not we continue to allow the deductibility of sales taxes," said Elliott Parker, an economist at UNR, referring to the provision that allows Nevada tax filers to deduct sales tax on their federal returns. Others include programs that give homebuyers tax credits and underwater homeowners tax waivers for refinanced homes "If you didn't have the mortgage tax deductions, I'm fairly certain that would have a negative effect on home purchases," said Eric Herzik, a political science professor at UNR. "Nevada's economy is still so fragile that we need all the help we get." Those tax programs expire at the end of 2013. If they are not renewed, it could severely affect Nevada's economy — and the state's tax revenue — far more than an online sales tax. When people earn income, "they go and buy stuff and they pay gas taxes, taxes on products, on their homes and that money filters through the economy," Herzik said. When people anticipate a heavy tax burden, there's an incentive to spend less, leaving products unsold, keeping home prices low and reducing governments' tax base. Similarly, experts argue, there are larger pots of potential revenue to be uncovered at the state level. The expected $200 million from online sales taxes that would come with the Marketplace Fairness Act is equivalent to barely one percent of the state's $17.9 billion 2012-13 budget. "Regardless of what the federal government does, the Nevada tax code needs to be examined," Herzik said. "With less disposable money, with easy credit now gone, people just don't spend as much on gaming. We don't do a very effective job taxing mining. We have the modified business tax — which is a stupid tax because you pay a tax on each employee — so there's a built-in incentive not to hire." "Nevada's whole tax structure needs to be looked at," Herzik added. "But that's a long-term process." "Online businesses should be a source of jobs, not a source of new tax revenue. Our Internet retailers shouldn't be forced to become tax collectors for other states." — SEN. KELLY AYOTTE, NEW HAMPSHIRE REPUBLICAN | 1 APRIL 2013 20130401_VI01_F.indd 17 | 17 3/28/13 2:49:32 PM