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Internet sales tax opponents face an uphill climb

WASHINGTON - A loose coalition of anti-tax activists, direct marketers and financial industry trade groups has a tough task this week in overcoming bipartisan support for letting states impose sales taxes on out-of-state sellers.

Big-box retailers and state governments showed last month that they command wide backing for the levy. Opponents - including Sen. Jeanne Shaheen, D-NH, and Sen. Kelly Ayotte, R-NH - are emphasizing the potential flaws in the legislation as they try to peel away that support.

Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, said the measure wasn't ready to debate yet. "This bill is bad for business and bad for jobs," he said. "It is full of unintended consequences."

Baucus is reportedly leaving Washington and will not seek reelection to a seventh term next year.

The dispute playing out on the Senate floor this week is a clash between business interests that falls outside the usual partisan lines of fiscal policy. The result could end tax-free Internet shopping and provide states with about $23 billion a year in additional revenue.

The Senate voted 74-20 Monday to advance the legislation. That's similar to a 75-24 non-binding vote last month. Five senators, all Republicans, voted differently than they did in March. Tom Coburn of Oklahoma and Mark Kirk of Illinois voted no Monday after voting yes in March. John Barrasso of Wyoming, Dan Coats of Indiana and Jeff Flake of Arizona moved in the opposite direction.

The bill's opponents, including Grover Norquist of Americans for Tax Reform, are warning lawmakers about the risk of financial transaction taxes, dozens of simultaneous audits and the expanding reach of state officials.

The Securities Industry and Financial Markets Association said states could have an incentive to impose transaction taxes. EBay blasted an e-mail to its users, maintaining that the small-business exemption in the bill wasn't significant enough and would lead to job losses. Retailers with less than $1 million in remote sales would be exempt.

In a letter to lawmakers, Norquist described the bill as a "massive expansion of tax authority.



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