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Follow VPR's statehouse coverage, featuring Pete Hirschfeld and Bob Kinzel in our Statehouse Bureau in Montpelier.

Internet Sales Tax Could Net $20 Million For State

As the Legislature struggles to put together a plan to raise new revenue, it could get an unexpected gift from Congress that would boost revenue in Vermont by at least $20 million.

Currently, Internet retailers like Amazon, don’t have to impose a state sales tax unless the company has a physical presence in the state.

Many small retailers have complained that this gives Amazon an unfair price advantage and state officials are upset because they lose revenue.

All of this could change in the coming months. The U.S. Senate is set to vote this week on legislation requiring most e-retailers to include any applicable sales tax in their transactions.

Congressman Peter Welch is a co-sponsor of a similar bill in the House and he’s hopeful that Congress is ready to move on this issue.

“If we get a successful vote in the Senate this is going to put a lot of wind at our back,” said Welch. “The bottom line here is that Republicans and Democrats all represent downtown areas where their local retailers, the bookstores the sporting good folks the people who really anchor downtown business are at this immense competitive disadvantage with the e-retailers.”

And Welch thinks the bill is a way to help individual states cope with mounting federal budget cuts.

“It’s not right for the federal government on the one hand to be cutting back relentlessly on the states nevertheless expecting them to provide the same level of services,” said Welch. “And on the other in effect interfering with their ability to make their own decisions about revenues.”

Vermont Tax Commissioner Mary Peterson notes that consumers who purchase items from e-retailers are supposed to pay the sales tax to the state but she says almost no one ever does:

“It’s really important to note that it’s not a new tax it’s just a tax that’s owed but is generally not being remitted when it’s done as a use tax as opposed to the vendor collecting it as a sales tax,” said Peterson. “It’s both a matter of revenue fairness, fairness between taxpayers and fairness for our Main Street businesses.”

And Peterson says there’s a lot of money at stake in this debate.

“If all of the vendors that were selling to Vermonters on line or by catalogue collected the tax we figure it would be about $40 million,” said Peterson. “However the various versions of the bill that I’ve seen do make some carve outs for example for small sellers so we wouldn’t see all of that revenue.”

Even if the U.S. Senate votes for the bill this week, it could be several months before the legislation is considered by the U.S. House and this timetable could make it difficult for Vermont lawmakers to count on this revenue for the next fiscal year.