CEA switches positions, now backs Internet sales tax

An Internet sales tax collection law would help state budgets and retain local jobs, the trade group says

The Consumer Electronics Association has switched its position on Internet sales taxes, with the huge trade group now supporting the collection of the tax.

For years, CEA has opposed efforts in the U.S. Congress to require Internet sellers to collect sales taxes, but the group has changed its mind, Gary Shapiro, CEA's president and CEO, said Tuesday. CEA's opposition to Internet sales taxes was based on the premise that the Internet was in its infancy, but that's no longer the case, he said.

A unified national collection policy that "applies regardless of whether a product is purchased online or in person will help ensure all retailers -- big, small or online -- operate fairly and competitively in the marketplace," Shapiro said.

CEA may be the first tech trade group to support online sales tax collection, although Amazon.com and some other companies have supported it.

Since a 1992 ruling by the U.S. Supreme Court, states are not allowed to collect sales taxes from sellers with no physical presence within their borders. In 45 states, customers who buy products on the Internet are supposed to keep track of their purchases and pay taxes to their state government, but a tiny percentage do.

In 2010, the state of Virginia, where CEA is headquartered, collected about $82,000 in Internet sales taxes from people who self-reported their out-of-state purchases, Shapiro said. The lack of an enforced sales tax collection cost the state tens of millions of dollars just in 2010, he said.

Internet sales tax collections would help cash-strapped state budgets and retain local jobs, Shapiro said.

CEA has not endorsed any of the three bills in Congress that would allow states to collect sales tax from online sellers. A sales tax collection system would have to provide exemptions for small businesses, although CEA hasn't determined what size of small business should be exempted, Shapiro said.

NetChoice, a trade group with members including Facebook, Yahoo and eBay, has opposed Internet sales tax legislation.

Online sales tax legislation would clear "the field of small businesses who use the Internet as a last-ditch survival strategy against the overwhelming competition from big-box stores," Steve DelBianco, NetChoice's executive director, said recently.

Lawmakers have tried for several years to pass Internet sales tax legislation with no success. But support for sales tax legislation seems to be growing, Shapiro said.

An Internet sales tax law is "inevitable" in the next few years, he said.

"It has to happen," he added.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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