The committee endorsed a plan to review and evaluate all tax breaks.
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Associated Press photoAssemblywoman Nancy Skinner, D-Berkeley, right called on clients of internet giant Amazon.com Monday to cancel their accounts unless it stops resisting a new California law that requires more online retailers to collect state sales tax, during a news conference at the Capitol in Sacramento, Calif. A legislative committee is recommending that Massachusetts start charging sales tax on online purchases. By MICHAEL NORTON
MATT MURPHY
BOSTON - While most legislative committees have taken a hiatus for the summer recess, the Committee on Revenue last week quietly endorsed legislation designed to allow the state to begin collecting sales taxes on online purchases, a proposal that supporters say would boost state coffers by $335 million per year but which is fraught with the hardball politics of tax policy debates.
The bill was polled out of committee on an 8-2 vote and is designed to allow the state to collect the 6.25 percent sales tax from online, mail and phone vendors, even those without a physical presence in the state, who sell taxable items to state residents. To do so, Congress would need to pass enabling legislation, but the bill would add Massachusetts to 24 states seeking a streamlined sales and use tax agreement.
While critics of the idea have portrayed the initiative as a new tax and an impediment to economic growth, Jon Hurst, president of the Retailers Association of Massachusetts, said it’s about collecting taxes that are already due and cautioned that income, property and corporate tax revenue streams, in addition to unpaid sales taxes, are drying up as often tax-free online sales overwhelm so-called Main Street retailers.
Mindful of the growing use of smart phones, retailers are luring more customers online, offering apps that can deliver item price comparisons and quickly ship products to the homes of purchasers. “The online sales just continue to grow,” he said. “The time has come. We’ve been talking about this for about 15 years. We’ve got to solve this or our Main Street retailers aren’t going to survive another 10 or 15 years.”
U.S. Sen. Dick Durbin, D-Illinois, in April filed federal legislation requiring sellers to collect sales taxes owed under current law regardless of whether sellers had a physical presence in a particular state. Durbin estimated states were collectively losing $37 billion in taxes on internet and catalogue sales. His bill would certify an interstate system to “streamline and harmonize” sales tax rules and provide states with explicit authority to require all retailers to collect sales taxes.
While Durbin said the National Governors Association and the National Conference of State Legislatures supported his Main Street Fairness Act, the proposal faces strong opposition from groups like Americans for Tax Reform, which claims the bill “would permit a small cartel of states to reach outside of their borders to force individuals and businesses who aren’t even residents to collect taxes.” The group further called the bill a “threat to federalism, accountable government and interstate commerce.”
With the 2012 election cycle gearing up already, Hurst sees a “very difficult” path toward Congressional action on internet sales tax reforms, but framed the issue as a way for the federal government to shore up state revenues as it looks to cut back on its own spending around the nation and reduce its deficit.
Revenue Committee Co-chairman Rep. Jay Kaufman (D-Lexington) also said he hoped the debate over deficit reduction would spur federal lawmakers to empower states to collect taxes owed to them.
“There is considerable demand for it here and as part of the federal deficit reduction conversation there’s some possibility that Congress will empower states to collect a tax that’s already due,” Kaufman said.
Kaufman said some vendors in states that have passed the Main Street Fairness Act have voluntarily agreed to collect and remit relevant sales taxes - consumers in Massachusetts are technically already required to pay sales tax on purchases made out-of-state or online for use here, but the “use tax” requires individuals to report those purchases voluntarily on their tax returns.
The issue is complicated by jurisdictional and collection issues, but Hurst argues that streamlining definitions and establishing clear lines of authority will help states begin to collect a tax that online shoppers, always hunting for the best prices, have come to view as “essentially an optional tax.”
Massachusetts retailers say online sellers got a further leg up on stores in 2009, when House Speaker Robert A. DeLeo led the effort to raise the sales tax rate from 5 percent to 6.25 percent. Since then, legislative leaders and Gov. Deval L. Patrick have shown little interest in raising or lowering tax rates, instead deploying spending cuts, using reserves and deferring pension payments to balance the budget.
With the economy struggling, there appears little appetite to take on another fight over tax policy.
“There isn’t a whole lot of desire on Beacon Hill to deal with taxes,” Hurst said. “We would argue this isn’t a new tax. What it is about is tax fairness. The tax is due. It’s really an issue of collection and remittance.”
Asked about the odds of advancing the bill, Kaufman said, “It’s certainly a priority for me. I can’t speak for my colleagues, so I know I have a bit of a sales job to do. The bar is fairly high for any bill that deals with taxes. I get it. This is a piece that’s really about fairness and business and jobs in the commonwealth.”
The state suspended its sales tax last weekend in a bid to stimulate commerce and Hurst called it a “huge weekend” for sales, mentioning a furniture store that registered 8 percent of its total annual sales.
“The outstanding success of the sales tax holiday shows how much frankly the sales tax is as a consumer motivator,” Hurst said. “That speaks to the fact that if they have the opportunity to avoid the sales tax, more times than not or too often they will take that opportunity.”
Lt. Gov. Timothy Murray this week declined to check in on the debate over sales tax collections.
Asked about the pending legislation in Congress and Massachusetts, Murray said, “I’m not really up to speed on it. Until I get educated on it, I’m reluctant to comment.”
The Revenue Committee also voted 10-1 to approve a bill creating a standing commission to review and evaluate all tax breaks and make recommendations concerning the effectiveness of tax breaks. The commission would make recommendations by the end of each year during a three-year review.
The legislation also requires new tax breaks to include stated public policy objectives, a deadline for lawmakers to review the break to determine its costs and benefits, and an evaluation to consider whether a sunset or clawback should be applied.
Kaufman said the tax expenditure review would encourage members of the commission to consider eliminating certain exemptions. He said he hoped lawmakers would be open to broader-based taxes with lower rates rather than the existing menu of taxes accompanied by a long list of exemptions.
“The way we’ve been thinking about looking at the tax expenditure budget is to think about the fact that we have so many exemptions to all our major taxes, were we able to get rid of some of those we could give consideration to lowering the overall rate,” Kaufman said.
He said the committee bill closely resembles language include in an outside section of the fiscal 2012 budget, but would make the tax expenditure review an annual exercise rather than a one-time event.
Under a change to the bill adopted before it cleared committee, the nine-member commission was expanded to 13 members, with the addition of representatives from the state’s auditor’s office, the state treasurer’s office and two members of the Governor’s Council of Economic Advisors.
That bill’s supporters in the House include Kaufman and Reps. Jennifer Benson, Alice Wolf, Stephen Kulik, Elizabeth Malia and Denise Andrews. Sen. James Eldridge is backing the bill in the Senate.
In this July 13, 2010 file photo, Bank of America's headquarters are shown in Charlotte, N.C. Bank of America Corp. is cutting 3,500 employees this quarter and working on restructuring plans that will ax several thousand more jobs, The Wall Street Journal and The New York Times reported citing people familiar with the situation. 
