Political Notebook: Haslam to testify before D.C. panel on online taxes

photo Tennessee Gov. Bill Haslam

Tennessee Gov. Bill Haslam will testify in front of the U.S. House Judiciary Committee on Tuesday where he will voice support of federal legislation granting states the power to make all online retailers collect sales taxes.

"He'll be testifying about the Marketplace Equity Act and leveling the playing field between online retailers and brick and mortar businesses," Haslam spokesman David Smith said in an email.

Many states, including Tennessee, have been clamoring for years to persuade Congress to resolve problems arising from a 1992 U.S. Supreme Court decision. The court held that retailers were only obligated to collect sales taxes from customers in states where the companies are physically located.

With the explosive growth of e-commerce sales, there usually aren't stores. States say resolving the issue, is critical to their finances.

And they have help from brick-and-mortar stores, including chains like Wal-Mart, as well as mall operators like Chattanooga-based CBL & Associates who say traditional retailers are at a competitive disadvantage because they have to collect sales taxes while e-tailers don't.

The issue has been batted back and forth for years in Congress, but it's picking up steam. U.S. Senate Majority Leader Harry Reid, D-Nev., said just this week in a news conference it could pass the Senate, according to The Hill newspaper. U.S. Sen. Lamar Alexander, R-Tenn., a former governor, is one of the primary Senate sponsors.

The bill has the support of Internet retail giant Amazon, which has built distribution centers in Tennessee, including two near Chattanooga and Cleveland.

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Amazon last year began striking deals with Republican governors or legislatures in several states, including Tennessee, to begin collecting sales taxes where the company has built distribution centers.

CBL Senior Vice President Michael Lebovitz said Friday he is "very optimistic" about the progress being made.

"The fact that there's a major hearing in front of the Judiciary Committee shows the actual seriousness of moving the legislation forward," he noted.

"I think it's great that Gov. Haslam's going to testify at that hearing because he certainly understands how important this is to states like Tennessee," Lebovitz added.

But Lebovitz said he doesn't have a prediction on passage this year.

The bill is drawing opposition from Internet retailers, including eBay, which argues it will hurt smaller businesses.

Consumers are supposed to pay the state and local sales taxes regardless of whether an Internet-based retailer or catalogue company collects them. But almost no one does.

In Tennessee, Amazon agreed to begin collecting sales taxes in 2014 absent federal action and the pact was put into state law. But one provision requiring Amazon to begin immediately notifying its customers that the tax was owed has already had an impact, officials said.

In April, consumer use tax collections were $571,197, an increase of $342,964 or 108.1 percent from April 2011. State Revenue Department officials say it is "reasonable" due to the notices and "increased media attention."