Federal tax resolution loses steam at city level

Melissa Crowe By Melissa Crowe

Aug. 27, 2013 at 3:27 a.m.
Updated Aug. 28, 2013 at 3:28 a.m.

Brick and mortar stores will not see support from Victoria City Council on a U.S. Senate bill to level the playing field with online retailers.

Councilman David Hagan's proposal to support the Marketplace Fairness Act died Tuesday in a tie vote.

Federal law requires online retailers to collect sales tax only if they have a physical presence in the customer's state.

Hagan argued that Victoria's brick and mortar businesses are at an 8.25 percent disadvantage to their online counterparts, which are off the hook to collect sales tax.

"It's not double taxing," Hagan said. "It's collecting a sales tax that is not collected at all currently."

However, some council members said they should focus on city issues, not federal ones.

"I'm not comfortable supporting this," Mayor Paul Polasek said. "We've elected a congressman to do this for us. ... People should vent to him."

The Senate passed the bill in May. Two other bills have also been introduced to the Senate and House.

"Every business should collect sales tax, or no business should collect sales tax," Hagan said.

Hagan read off a list of more than 10 Victoria businesses who left messages at the city manager's office in support of the bill.

Polasek noted that those businesses were called by Alliance for Main Street Fairness, an advocacy group that supports taxing online retailers, and were transferred to the city - they did not call on their own.

"That was an interesting tactic," Polasek said.

Councilwoman Josephine Soliz said she sees the act as an update to state law.

"It's a way to correct something that needs to be corrected and needs to be done," she said.

The U.S. Supreme Court decided in 1992 that a state cannot force an out-of-state business, which takes orders by Internet, catalog or telephone, to serve as the state's sales tax collector if the business has no physical presence in the state. The burden to pay the tax falls on the consumer.

"Current state law says we all have to report and pay sales tax on any item bought out of state," Polasek said. "I know we all do that, right? -- I'm joking. No one does that."

Councilman Tom Halepaska said the list of big box supporters raised a red flag.

"My main concern is that the supporters of this bill are the very same people that seem to be the greatest destroyer of small business," he said. "Yet, (this bill) is brought in the name of small business, and that's disturbing to me."

Polasek said the resolution, unlike supporting the Main Street Post Office, is not in the city's jurisdiction.

Councilman Andrew Young agreed.

We elected leaders in Congress to handle these situations, he said.

"I think we know where our bounds are," he said.

He said the Act is more "convoluted than I'd like to believe."



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