Grassley, Harkin differ on online sales tax measure

Iowa’s United States senators split over a Senate bill that would allow states to require online retailers to collect sales taxes.

U.S. Sen. Tom Harkin, a Democrat, voted for it. U.S. Sen. Charles Grassley, a Republican, voted against it. The bill passed on a 69-27 vote on Monday and now goes to the House of Representatives.

”This legislation levels the playing field for Iowa’s Main Street businesses, which are at a disadvantage as residents look at merchandise in local stores and then order the product online,” Harkin said. ”It also means a more level playing field for our state and local governments, which are experiencing a loss of revenue that has to be made up with fewer services or higher property or other taxes. Now that the U.S. Senate has sent a clear message, I hope to see the bill become law this year.”

In a written statement, Grassley expressed concerns about practical and constitutional elements of the bill.

”There are a lot of questions about how this legislation would work as a practical matter,” he said. ”How would it be enforced, even on foreign-based businesses, and what kinds of costs and administrative burdens would it put on all businesses? Could businesses face audits from any state that acts on the authority given by the legislation? What about the lack of certainty regarding how far the tax authority could be taken by states? Would it result in states imposing taxes on financial transactions, for example?”

”In addition, there’s an unresolved constitutional concern,” he said. ”Congress has the authority to allow states to exercise authority across state lines under the commerce clause, but Congress does not have the authority to loosen requirements under the due process clause, which requires a minimum level of contacts between a state and a business before a state may exercise taxing authority over a business. A single sale in a state isn’t likely to meet that standard.”