Conn. sees Internet tax delayed after legal fight

Posted: 6:00 pm Mon, November 28, 2011
By Associated Press

HARTFORD, Conn. ? Connecticut?s revenue commissioner said Monday he?s advised state lawmakers to forget about $9.4 million in revenue from Internet taxes as the state digs in for what could be a long legal fight.

Kevin Sullivan, commissioner of revenue services, said in an interview with The Associated Press that Connecticut is not pursuing sales tax collections from Amazon since the online seller reached a compromise with California delaying expanded online tax collections until at least September. But it will pursue other larger online sellers, he said.

?We?re not going to focus on Amazon because it would send the wrong message to Amazon for taking a huge step,? he said. ?It makes sense to pick on someone else.?

Maryland Comptroller Peter Franchot made a similar recommendation in a Nov. 4 letter to Gov. Martin O?Malley and legislative leaders.

Chasing the nearly $200 million in sales tax that goes uncollected by online retailers would generate between $20 million and $40 million under a best-case scenario, he wrote. Amazon has fought such efforts in other states in court, through ballot initiatives and by severing business relationships with in-state affiliates.

Revenue lost in Maryland due to online sales is expected to grow to $243 million by next fiscal year and $327 million a decade from now.

Connecticut, Sullivan said, will ?probably move Overstock and eBay to the head of the class.?

Representatives of Amazon, eBay and Overstock did not immediately respond to email and phone messages seeking comment.

The so-called Amazon tax was included in budget legislation signed in May by Gov. Dannel P. Malloy. It requires Internet retailers to collect tax on sales generated through website affiliates.

Sullivan said the issue ultimately will be resolved in ?some sort of settlement or some sort of legal challenge.? The loss of $9.4 million represents a lot of money but is a tiny portion of the state?s two-year $40.1 billion budget, he said.

Still, the stakes are potentially high for Connecticut, which is demanding that Internet companies collect the state?s 6.35 percent sales tax. Monday was ?Cyber Monday,? which has grown increasingly popular. Last year, it was the busiest online shopping day ever, with sales of more than $1 billion, according to research firm ComScore Inc.

A record 122.9 million Americans are expected to shop on the day, up from 106.9 million who shopped on ?Cyber Monday? last year, according to a survey conducted for?Shop.org.

Last month, Connecticut officials said Amazon wrote the Department of Revenue Services, saying it?s not obligated to abide by state law requiring Internet sellers to collect state sales taxes. It said it does not have a physical presence in Connecticut and does not have to collect and remit taxes to the state.

Amazon struck a compromise with California that delayed the expanded online tax collections until at least September, giving Amazon and other retailers more time to lobby Congress for a federal law that would authorize states to require sellers to collect sales taxes of goods to in-state customers regardless of a seller?s location.

Sullivan said federal legislation would eliminate objections by Internet sellers to collect and pay the sales tax.

?This would be the coup de grace for any opposition,? he said.

Source: http://thedailyrecord.com/2011/11/28/conn-sees-internet-tax-delayed-after-legal-fight/

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