The Finance, Revenue, and Bonding Committee voted 38 to 14 Thursday in favor of a bill that would require Internet stores, such as Amazon, with no physical presence in the state to collect sales tax on purchases by Connecticut residents.
The fiscal note says the state stands to gain $9.3 million a year over the next two years from the tax, but some lawmakers like Rep. Sean Williams, R-Watertown, believe Connecticut could lose jobs if this bill passes.
Williams said the committee heard testimony from Connecticut companies doing business with Amazon who will likely have to leave the state if they want to continue to offer their products through the online mega-store.
Online retailers like Tom Caporaso of Clarus Marketing Group told committee that Amazon and Overstock.com will not do business with affiliates that reside in a state with this type of legislation.
“This not just our guess of what will happen, it is a fact,” Caporaso said last month. He said Rhode Island is in the process of repealing its law because no revenue increase was realized once the affiliate relationships were terminated.
“I think it’s a federal issue, not a state by state issue,” Caporaso said.
Williams agrees. He said it’s really an issue that should be addressed on a national level.
But Rep. Patricia Widlitz, co-chairwoman of the committee, said states often force Congress to take action on things by passing them at the state level.
“I feel very strongly we need to take a stand,“ Widlitz said.
She said she wants to help close the tax loophole that’s hurting brick and mortar businesses, like small bookstores.
Suzy Staubach, general manager of the UConn Co-Op, told the committee last month that this type of legislation will level the playing field and help the brick and mortar stores compete against giants like Amazon.
Staubach said if Amazon decides not to do business with Connecticut retailers there are other companies ready to fill in the gap. Opponents of the legislation, including numerous retailers, disputed the desire of other companies to come in and fill-in the gap which would be left by the retail giant Amazon.
Department of Revenue Services Commissioner Kevin Sullivan told the committee that Gov. Dannel P. Malloy’s administration hasn’t taken a position on the legislation, but he was quick to point out that Connecticut’s personal income tax forms already have an area where taxpayers are supposed to report sales tax from Internet or out-of-state purchases. He told the committee about 2 or 3 percent of taxpayers claim those taxes on their tax returns.
Asked about how far she plans on pushing this legislation and Widlitz said she’s talked to several lawmakers who understand its hurting their constituents. She said she’s fairly confident it will be part of the overall tax package offered by the legislature.
A few weeks ago when Malloy was asked about the bill he said he would prefer Congress tackle the issue.
According to experts passage of the bill does come with some risk of litigation, but advocates for the proposal say states should not be bullied by Amazon and other online retailers.
When Amazon withdrew its retail affiliations from Colorado after that state passed legislation, Michael Mazerov, senior fellow with the Center for Budget Policies and Priorities issued this statement: “We’ve long known that Amazon doesn’t want to collect sales taxes. It is determined to maintain its price advantage over local Colorado merchants by not charging tax. But what’s good for Amazon is bad for schools, roads, and other public services in Colorado, and it’s bad for local Colorado merchants as well.”
Clay George a senior policy fellow with CT Voices for Children echoed Mazerov’s sentiment when he told the committee last month that they should pass the legislation because it means Connecticut, “will join with about six other states in sending a signal to the judicial system and to Congress that this is an important area of law that needs to be updated.”
Click here to read our previous story on the bill.