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Congress considers online sales tax

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Two days after Cyber Monday, a congressional committee considered a trio of bills that would allow states to collect sales tax from online sales.

The U.S. Supreme Court says e-merchants don’t have to collect sales taxes unless they maintain a “physical presence” in a particular state, but it left the door open if Congress had other ideas. As states scramble for revenue, Congress is reconsidering that exemption for online retailers.

Testifying before the House Judiciary Committee, chief Patrick Byrne repeated the original rationale for exempting online retailers from what’s required of brick and mortar businesses: "Passage of such legislation would poison the Internet’s fertile ground for new, innovative e-commerce firms."

Byrne added that there isn’t software available to figure out the different sales taxes in different states. "Supporters of the pending bill claim such solutions are readily available in the marketplace, but the fact is they’re not." He said states should be required to provide "a truly plug-and-play software solution." An Amazon executive disputed that claim, saying the company was already using such software.

California’s passed a new online sales tax law, but it only applies to sellers with a physical presence in the state. A University of Tennessee study indicates that cost California close to $2 billion in lost sales tax last year.